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EX-31.1 - CERTIFICATION - B-Scada, Inc.scda_ex311.htm
EX-31.2 - CERTIFICATION - B-Scada, Inc.scda_ex312.htm
EX-32.2 - CERTIFICATION - B-Scada, Inc.scda_ex322.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: January 31, 2015

 

 

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)

 

 

 

 

 

9030 W Ft Island Tr.

Building 9

Crystal River, Florida

 

34429

(Address of principal executive offices)

 

(Zip Code)


Issuer's telephone number (352) 564-9610


__________________

(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).    oYes  x No

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

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

The number of shares of the issuer’s common equity outstanding as of March 12, 2015 was 27,243,414 shares of common stock, par value $.0001.





B-SCADA, INC.


TABLE OF CONTENTS


PART I.  FINANCIAL INFORMATION

3

 

 

  ITEM 1.  FINANCIAL STATEMENTS

3

 

 

    CONSOLIDATED BALANCE SHEETS

3

 

 

      AT JANUARY 31, 2015 (UNAUDITED) AND OCTOBER 31, 2014

3

 

 

    CONSOLIDATED STATEMENTS OF OPERATIONS [UNAUDITED]

4

 

 

      FOR THE THREE MONTHS ENDED JANUARY 31, 2015 AND 2014

4

 

 

    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) [UNAUDITED]

5

 

 

      FOR THE THREE  MONTHS ENDED JANUARY 31, 2015 AND 2014

5

 

 

    CONSOLIDATED STATEMENTS OF CASH FLOWS [UNAUDITED]

6

 

 

      FOR THE THREE  MONTHS ENDED JANUARY 31, 2015 AND 2014

6

 

 

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED]

7

 

 

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

15

 

 

  ITEM 4.  CONTROLS AND PROCEDURES

21

 

 

PART II.  OTHER INFORMATION

23

 

 

  ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES

23

 

 

  ITEM 4. MINE SAFETY DISCLOSURES

23

 

 

  ITEM 6.  EXHIBITS

23

 

 

SIGNATURES

24
















2



PART I.  FINANCIAL INFORMATION

 

ITEM 1.  FINANCIAL STATEMENTS

B-SCADA, INC.


CONSOLIDATED BALANCE SHEETS


 

 

January 31,

 

October 31,

 

 

2015

 

2014

 

 

(Unaudited)

 

 

Assets

 

 

 

 

Current Assets

 

 

 

 

  Cash and Cash Equivalents

 

$

1,586,932

 

$

1,144,915

  Accounts Receivable - Net

 

 

323,417

 

 

233,525

  Accrued Revenue

 

 

22,050

 

 

222,550

  Deferred Income Tax - Current

 

 

169,324

 

 

186,221

  IVA Tax Receivable - Net

 

 

27,782

 

 

--

  Prepaid Expenses and Other Current Assets

 

 

43,928

 

 

226,598

    Total Current Assets

 

 

2,173,433

 

 

2,013,809

 

 

 

 

 

 

 

Property and Equipment - Net

 

 

220,615

 

 

223,452

 

 

 

 

 

 

 

Other Assets

 

 

 

 

 

 

  Intangible Assets

 

 

114,735

 

 

114,735

  Deferred Income Tax

 

 

794,487

 

 

711,272

  Security Deposits

 

 

1,557

 

 

1,500

  Total Other Assets

 

 

910,779

 

 

827,507

 

 

 

 

 

 

 

    Total Assets

 

$

3,304,827

 

$

3,064,768

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

  Accounts Payable and Accrued Liabilities

 

$

227,329

 

$

142,528

  Deferred Revenue

 

 

489,442

 

 

178,698

  Mortgage Payable - Current

 

 

16,267

 

 

16,066

    Total Current Liabilities

 

 

733,038

 

 

337,292

 

 

 

 

 

 

 

Long Term Liabilities

 

 

 

 

 

 

  Mortgage Payable

 

 

98,284

 

 

102,425

 

 

 

 

 

 

 

    Total Liabilities

 

 

831,322

 

 

439,717

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

--

 

 

--

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

  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, 27,243,414

    at January 31, 2015 and October 31, 2014 respectively

 

 

2,724

 

 

2,724

  Additional Paid in Capital

 

 

7,900,463

 

 

7,900,463

  Accumulated Other Comprehensive Loss

 

 

(8,213)

 

 

(5,215)

  Accumulated Deficit

 

 

(5,421, 469)

 

 

(5,272,921)

  Total Stockholders’ Equity

 

 

2,473,505

 

 

2,625,051

 

 

 

 

 

 

 

    Total Liabilities and Stockholders’ Equity

 

$

3,304,827

 

$

3,064,768



See the accompanying notes to consolidated financial statements.



3



B-SCADA, INC.


CONSOLIDATED STATEMENTS OF OPERATIONS

[UNAUDITED]



 

For the Three Months Ended

 

January 31,

 

2015

 

2014

 

 

 

 

Revenue

 

 

 

  Technology Licensing and Support

$

443,853

 

$

269,800

  Commercial Software

 

52,291

 

 

65,972

    Total Revenues

 

496,144

 

 

335,772

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

  Technology Licensing and Support

 

85,116

 

 

25,783

  Commercial Software

 

86,908

 

 

25,876

  Sales and Marketing

 

145,309

 

 

76,233

  Research and Development

 

26,129

 

 

58,815

  General and Administrative

 

362,370

 

 

126,468

  Depreciation and Amortization

 

4,342

 

 

1,258

    Total Operating Expenses

 

710,174

 

 

314,433

 

 

 

 

 

 

Operating Income (Loss)

 

(214,030)

 

 

21,339

 

 

 

 

 

 

Other Income (Expenses)

 

 

 

 

 

  Interest Income

 

628

 

 

150

  Interest Expense

 

(1,464)

 

 

--

    Total Other Income (Expenses) - Net

 

(836)

 

 

150

 

 

 

 

 

 

Income (Loss) Before Income Taxes

 

(214,866)

 

 

21,489

 

 

 

 

 

 

Benefit from Income Taxes

 

(66,318)

 

 

--

 

 

 

 

 

 

Net Income (Loss)

$

(148,548)

 

$

21,489

 

 

 

 

 

 

Basic Earnings (Loss) Per Common Share

$

(0.01)

 

$

--

 

 

 

 

 

 

Diluted Earnings (Loss) Per Common Share

$

(0.01)

 

$

--

 

 

 

 

 

 

Weighted-Average Common Shares Outstanding -

 

 

 

 

 

  Basic Earnings (Loss) Per Share

 

27,243,414

 

 

24,586,672

 

 

 

 

 

 

Weighted-Average Common Shares Outstanding -

 

 

 

 

 

  Diluted Earnings (Loss) Per Share

 

27,243,414

 

 

24,796,672











See the accompanying notes to consolidated financial statements.



4



B-SCADA, INC.


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

[UNAUDITED]



 

For the Three Months Ended

 

January 31,

 

2015

 

2014

 

 

 

 

Net Income (Loss)

$

(148,548)

 

$

21,489

 

 

 

 

 

 

Other Comprehensive Income (Loss)

 

 

 

 

 

  Foreign Currency Translation Adjustment

 

(2,998)

 

 

--

 

 

 

 

 

 

Comprehensive Income (Loss)

$

(151,546)

 

$

21,489







































See the accompanying notes to consolidated financial statements.



5



B-SCADA, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS

[UNAUDITED]


 

For the Three Months Ended

 

January 31,

 

2015

 

2014

 

 

 

 

Operating Activities

 

 

 

  Net Income (Loss)

$

(148,548)

 

$

21,489

  Adjustments to Reconcile Net Income (Loss) to Net Cash

 

 

 

 

 

    Provided by Operating Activities:

 

 

 

 

 

      Depreciation and Amortization

 

4,342

 

 

1,258

      Deferred Revenue

 

310,744

 

 

228,140

      Deferred Income Tax Benefit

 

(66,318)

 

 

--

 

 

 

 

 

 

  Changes in Assets and Liabilities:

 

 

 

 

 

    (Increase) Decrease in:

 

 

 

 

 

      Accounts Receivable

 

(89,892)

 

 

20,022

      Accrued Revenue

 

200,500

 

 

190,650

      IVA Tax  Receivable-Net

 

(27,782)

 

 

--

      Prepaid Expenses and Other Current Assets

 

182,670

 

 

1,706

      Security Deposits

 

(57)

 

 

--

    Increase (Decrease) in:

 

 

 

 

 

      Accounts Payable and Accrued Liabilities

 

84,801

 

 

(9,874)

        Net Cash Provided by Operating Activities

 

450,460

 

 

453,391

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

  Acquisition of Equipment

 

(1,505)

 

 

(1,238)

  Deposit on Property

 

--

 

 

(10,000)

        Net Cash Used for Investing Activities

 

(1,505)

 

 

(11,238)

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

  Payment of Mortgage Payable

 

(3,940)

 

 

--

        Net Cash Used for Financing Activities

 

(3,940)

 

 

--

 

 

 

 

 

 

 

 

 

 

 

 

Foreign Currency Translation Effect

 

(2,998)

 

 

--

 

 

 

 

 

 

Change in Cash and Cash Equivalents

 

442,017

 

 

442,153

 

 

 

 

 

 

Cash and Cash Equivalents - Beginning of Period

 

1,144,915

 

 

252,571

 

 

 

 

 

 

Cash and Cash Equivalents - End of Period

$

1,586,932

 

$

694,724

 

 

 

 

 

 

Supplemental Disclosures of Cash Flow Information

 

 

 

 

 

  Cash paid during the period for:

 

 

 

 

 

    Interest

$

1,464

 

$

--

    Income Taxes

$

--

 

$

--







See the accompanying notes to consolidated financial statements.



6



B-SCADA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED]

JANUARY 31, 2015


(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. On October 15, 2014, we formed a wholly-owned subsidiary in Spain, B-Scada Soluciones Industriales SL (“B-Scada Spain”) to provide improved sales, service and support to Europe, Latin America, the Middle East and Africa.


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 the 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)  Summary of Significant Accounting Policies


Our other accounting policies are set forth in Note 2 to our audited consolidated financial statements included in our October 31, 2014 Form 10K.


Unaudited Interim Statements - The accompanying unaudited interim consolidated financial statements as of January 31, 2015, and for the three months ended January 31, 2015 and 2014 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 consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the consolidated financial position as of January 31, 2015 and the consolidated results of operations and cash flows for the three months ended January 31, 2015 and 2014.  The consolidated results of operations for the three months ended January 31, 2015 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.


Principles of Consolidation - The consolidated financial statements include the accounts of B-Scada, Inc. and its wholly-owned Spanish subsidiary, B-Scada Soluciones Industriales SL.  All material intercompany balances and transactions have been eliminated in consolidation.


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







7



B-SCADA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED]

JANUARY 31, 2015


(2)  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.


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


We maintain our cash and cash equivalents in accounts with major financial institutions in the form of demand deposits.  Deposits in these banks may exceed the amounts of insurance provided on such deposits.  At January 31, 2015, we had approximately $851,000 and $248,000, respectively, in cash in two financial institutions in excess of the $250,000 FDIC insured limit. At October 31, 2014, we had approximately $350,000 and $250,000, respectively, in cash in two financial institutions in excess of the $250,000 FDIC insured limit.  


Concentrations of credit risk with respect to trade accounts receivable are limited.  We routinely assess the financial strength of customers and, based upon factors concerning credit risk, we establish an allowance for doubtful accounts.  As of January 31, 2015 and October 31, 2014, based on this assessment, management has not established an allowance for doubtful accounts. Management believes that accounts receivable credit risk exposure is limited.


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


Intangible assets not subject to amortization are tested annually for impairment and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. These tests were performed for the year ended October 31, 2014 and it was determined that the carrying value of the asset was not impaired.


Foreign Currency Translation - We consider the U.S. dollar (“US$”) to be our functional currency.  B-Scada Spain considers the Euro (“Euro”) to be its functional currency.  Assets and liabilities are translated into US$ at the period end exchange rate.  Income and expense amounts are translated using the average rates during the period. Gains and losses resulting from translating foreign currency financial statements are included in accumulated other comprehensive income or loss, a separate component of stockholders’ equity.



8



B-SCADA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED]

JANUARY 31, 2015


(2)  Summary of Significant Accounting Policies (Continued)


Subsequent Events - The Company evaluated subsequent events, which are events or transactions that occurred after January 31, 2015 through the date of the issuance of the accompanying consolidated financial statements.


(3)  New Authoritative Accounting Guidance


In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers” (Topic 606), which supersedes the revenue recognition requirements in ASC Topic 605, “Revenue Recognition”, and most industry-specific guidance. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.  The amendments in the ASU will be applied using one of two retrospective methods. The effective date will be the first quarter of our fiscal year ended October 31, 2018. We have not determined the potential effects on our consolidated financial statements.


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.


(4)  Property and Equipment


Property and equipment consists of the following:


 

January 31,

 

October 31,

 

 

 

2015

 

2014

 

Useful Lives

 

[Unaudited]

 

 

 

 

 

 

 

 

 

 

Land

$

15,531

 

$

15,531

 

--

Building and Improvements

 

176,071

 

 

176,071

 

7 - 40 years

Computer Equipment

 

55,304

 

 

55,304

 

5 years

Office Furniture and Equipment

 

34,429

 

 

34,429

 

5 - 7 years

Software

 

39,098

 

 

37,593

 

3 years

Total

 

320,433

 

 

318,928

 

 

Less: Accumulated Depreciation

  and Amortization

 

 (99,818)

 

 

 (95,476)

 

 

 

$

220,615

 

$

223,452

 

 


(5)  Intangible Assets


The intangible assets consist of the following:


 

January 31,

 

October 31,

 

2015

 

2014

 

[Unaudited]

 

 

 

 

 

 

Domain names

$

114,735

 

$

114,735




9



B-SCADA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED]

JANUARY 31, 2015


(6)  Mortgage Payable


In February 2014, we purchased a new office facility and incurred a mortgage in the amount of $127,500 payable to the seller of the property. The balance is payable over 7 years in monthly payments of $1,802 which include interest at 5% per annum.  The outstanding mortgage balance at January 31, 2015 and October 31, 2014 is $114,551 and $118,491, respectively.


Future maturities of long-term debt as of January 31, 2015 are as follows:


Twelve Months Ended

 

January 31, 2015

[Unaudited]

 

 

 

2016

$

16,267

2017

 

17,099

2018

 

17,974

2019

 

18,893

2020

 

19,860

Thereafter

 

24,458

 

 

 

 

$

114,551


(7)  Stockholders’ Equity


We are authorized to issue 100,000,000 shares of common stock, par value $0.0001 per share and 5,000,000 shares of preferred stock, par value $0.0001 per share. At January 31, 2015 and October 31, 2014 there are 27,243,414 common shares issued and outstanding.  There are no shares of preferred stock issued and outstanding.   


On March 6, 2014, the holder of the warrant to purchase 300,000 shares of Company common stock elected to exercise the warrant through a cashless exercise, as defined in the warrant agreement.  At the time of exercise, the applicable market value of our common stock was $0.40 and as a result we issued 232,500 shares of Company common stock in full settlement of the warrant.


Effective as of August 6, 2014, we entered into a Stock Purchase Agreement with Yorkmont Capital Partners, L.P. (“Yorkmont”) pursuant to which Yorkmont purchased 2,424,242 shares of our common stock for an aggregate purchase price of $800,000 ($0.33 per share).

















10



B-SCADA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED]

JANUARY 31, 2015


(7)  Stockholders’ Equity (Continued)


The following table summarizes warrant activity.


 

 

For the Three Months Ended

For the Year Ended

 

 

January 31, 2015

October 31, 2014

 

 

(Unaudited)

 

 

 

Shares

Weighted

Average

Exercise

Price

Shares

Weighted

Average

Exercise

Price

 

 

 

 

 

 

Outstanding at beginning

  of period

 

--

--

300,000

$0.09

  Granted/Sold

 

--

--

--

--

  Expired/Cancelled

 

--

--

--

--

  Forfeited

 

--

--

 (67,500)

$0.09

  Exercised

 

--

--

 (232,500)

$0.09

Outstanding at end of period

 

--

--

--

--


(8)  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 months ended January 31, 2014 (there were no dilutive securities in three months ended January 31, 2015):


 

Income

 

Shares

 

Per Share

 

(Numerator)

 

(Denominator)

 

Amount

 

 

 

 

 

 

Basic EPS:

 

 

 

 

 

Income Available to Common Stockholders

$

21,489

 

24,586,672

 

$

--

Effect of Dilutive Securities:

 

 

 

 

 

 

 

  Warrants

 

--

 

210,000

 

 

--

Diluted EPS:

 

 

 

 

 

 

 

Income Available to Common Stockholders

 

 

 

 

 

 

 

  Plus Assumed Exercises

$

21,489

 

24,796,672

 

$

--















11



B-SCADA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED]

JANUARY 31, 2015


(9)  Income Taxes


Components of the provision (benefit) from income taxes are as follows:


 

For the Three Months Ended

 

January 31,

 

2015

 

2014

 

[Unaudited]

 

[Unaudited]

 

 

 

 

Current

 

 

 

  United States

$

--

 

$

7,551

  Foreign

 

--

 

 

--

    Total Current

 

--

 

 

7,551

 

 

 

 

 

 

Deferred

 

 

 

 

 

  United States

$

(11,067)

 

$

(7,551)

  Foreign

 

(55,251)

 

 

--

    Total Deferred

 

(66,318)

 

 

(7,551)

 

 

 

 

 

 

    Total

$

(66,318)

 

$

--


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


 

For the Three Months Ended

 

January 31,

 

2015

 

2014

 

[Unaudited]

 

[Unaudited]

 

 

 

 

United States Statutory Corporate

 

 

 

  Income Tax Rate

(34.00)%

 

34.00%

State Income Tax Net of Federal

(3.63)%

 

3.63%

Foreign Income Tax Effect

6.77%

 

--%

Change in Valuation Allowance on

 

 

 

  Deferred Tax Assets

--%

 

(37.63)%

 

 

 

 

  Income Tax Provision

(30.86)%

 

--%


Pre-tax income (loss) consists of the following:


 

For the Three Months Ended

 

January 31,

 

2015

 

2014

 

(Unaudited)

 

(Unaudited)

 

 

 

 

United States

$

(30,739)

 

$

21,489

Foreign

 

(184,127)

 

 

--

  Total

$

(214,866)

 

$

21,489




12



B-SCADA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED]

JANUARY 31, 2015


(9)  Income Taxes (Continued)


The components of deferred tax assets (liabilities) at January 31, 2015 and October 31, 2014 are as follows:


 

January 31,

 

October 31,

 

2015

 

2014

 

[Unaudited]

 

 

Deferred Tax Assets - Current

 

 

 

  Net Operating Losses

$

152,745

 

$

175,356

  Accrued Vacation Pay

 

16,579

 

 

10,865

 

 

169,324

 

 

186,221

Deferred Tax Assets (Liabilities) - Long Term

 

 

 

 

 

  Net Operating Losses

$

798,524

 

$

715,403

  Property and Equipment

 

(4,037)

 

 

(4,131)

 

 

794,487

 

 

711,272

 

 

 

 

 

 

    Net Deferred Tax Asset

$

963,811

 

$

897,493


Net operating loss carry forwards for tax purposes were approximately $2.4 million at October 31, 2014.  A substantial portion of these losses begin to expire in fiscal 2028; all losses expire in fiscal 2030.  Tax benefits of operating loss carry forwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carry forward period, and other circumstances.


From our inception through October 31, 2012, we had established a full valuation allowance on our deferred tax asset because of a lack of sufficient positive evidence to support its realization.  At October 31, 2014 and 2013, based on its evaluation of the positive and negative evidence, management determined that the Company would utilize its net operating loss carry forwards in future periods and that it was "more likely than not" that it would utilize its deferred tax assets. The positive evidence evaluated as of October 31, 2014 and 2013 consists of (i) our increased revenues, including the signing of several long term licensing agreements which run through fiscal 2019; (ii) our positive earnings, beginning in fiscal 2011 and increasing in each of fiscal 2012 through 2014; (iii) our ability to maintain operating costs as we have grown revenues; (iv) the utilization of net operating loss carry forwards in the last four fiscal years. The negative evidence evaluated as of October 31, 2014 and 2013 consists of (i) our history of operating losses from inception through fiscal 2010; (ii) the possibility that a licensing agreement is cancelled or that non licensing revenues will decline; (iii) the possibility that our operating costs will increase. As a result, management elected to reduce the Company's deferred tax asset valuation allowance by $490,749 and $406,744 as of October 31, 2014 and 2013, respectively.


Overall the valuation allowance increased (decreased) by approximately $-0- and $(680,000) in the three months ended January 31, 2015 and the year ended October 31, 2014, respectively.


(10)  Commitments and Contingencies


Lease


B-Scada Spain subleases office space in Spain from an entity related to the two principal employees in Spain. The lease is for a term of five years commencing November 1, 2014 with annual renewal options thereafter. Base rent is $1,276 (Euro 1,050) per month for the first fourteen months after which it increases to $1,531 (Euro 1,260) per month for the remainder of the term. There is an annual escalation based on the Spanish National General Index of Consumer Prices and we are responsible for the related costs, such as, taxes, utilities and maintenance. Rent expense amounted to $3,827 (Euro 3,150) for the three months ended January 31, 2015. Future lease commitments through the twelve months ended January 31 are as follows: 2016 - $15,564; 2017 - $18,371; 2018 - $18,371; 2019 - $18,371; 2020 - $13,778.



13



B-SCADA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED]

JANUARY 31, 2015


(10)  Commitments and Contingencies (Continued)


We leased office space in Crystal River, Florida, on a month to month basis through April 30, 2014 when we relocated to the new office facility we purchased. The lease terms were 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, 2014 amounted to approximately $9,000.


Compensation Agreements


In connection with the formation of B-Scada Spain, we entered into agreements with two individuals and a related entity in Spain to establish and maintain our Spanish office and for employment services. In October 2014, we made an advance payment of approximately $145,000 for services related to the establishment of our office in Spain. Such services included, among other necessary services, securing and setting up the office location, interviewing and hiring qualified personnel and translating technical documents, marketing materials, web site, etc. These services were completed in the first quarter of fiscal 2015 and at such time this amount was expensed.  Contingent upon continued employment,  the two individuals will each be paid 12.5% (25% in total) of the annual net profit of B-Scada Spain, calculated at each fiscal year end, until a total of $175,000 ($350,000 in total) has been paid at which time payments will cease.  No payment was required to be made for the year ended October 31, 2014.


We also entered into employment agreements with the two individuals effective November 1, 2014. The agreements provide for annual salaries of Euro 42,615 (approximately US $54,000) and Euro 30,000 (approximately US $38,000), respectively, and commissions as defined in our sales commission policy, among other customary terms, such as, vacation pay and qualified expense reimbursements. The agreements are on an ongoing basis unless terminated by either us or the employee, as defined in the agreements. The agreements also provide that if the employee is terminated due to redundancy (layoff), in addition to being paid any unused vacation pay, the employee, if employed for at least one full year, will receive redundancy pay equal to 45 days for each year of employment, not to exceed 42 months of equivalent salary. Both the unused vacation pay and redundancy pay are payable at the employee’s then applicable base salary.


(11)  Subsequent Events


On February 11, 2015, we elected a new director to the Board of Directors.  Pursuant to the election, the director was granted a five year non-qualified option to purchase an aggregate of 250,000 shares of our common stock at an exercise price of $0.48 per share.  The option vests as follows:  83,333 shares immediately; 83,333 shares on February 11, 2016; 83,334 shares on February 11, 2017.  As defined in the agreement, the option may terminate in earlier than 5 years.


















14



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 consolidated 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 involves unknown risks and uncertainties. Examples of forward-looking statements include: projections of capital expenditures, competitive pressures, revenues, growth prospects, product development, financial resources and other financial matters. You can identify these and other forward-looking statements by the use of words such as “may,” “will,” “should,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “potential” or the negative of such terms, or other comparable terminology. Our 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 (Human Machine Interface), SCADA (Supervisor Control and Data Acquisition) and IoT (Internet of Things) 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, petro chemical, emissions monitoring, building automation and other fields of business making use of HMI and SCADA 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.


Overall Strategic Goals

Our goal is to become a leading supplier of visualization 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 worldwide 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 provide consulting services and license portions of our technology to other companies for use in their software systems.


Products and Services

Our technology team has extensive experience in software design and development and has designed, built and delivered, over the years, world-class software solutions for numerous vertical markets. In addition to software development, we also derive income from consulting services, graphic design and contract development that we offer hand in hand with our software solutions.


Product Description

‘Status Machine Edition’ was released in January 2009 as an industrial control and monitoring application for heavy industry and manufacturing. 'Status Enterprise' is a supervisory level version of Machine Edition which was released in January 2014.


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


The Status family of products are 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.




15




Status 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 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 the Status product line 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 Machine Edition is now being used to monitor one of the largest subway systems in the world in Seoul, South Korea. Status Machine Edition monitors building automation performance in pharmaceutical manufacturing facilities, electricity distribution, mining equipment and furniture manufacturing.  


Status Enterprise is our management level management system released in January of 2014. Status Enterprise is a management-level HMI/SCADA System which allows customers to visualize their real time data and alarms, manage and organize their assets, integrate with other Enterprise systems, collaborate, analyze and archive data. Status Enterprise can bring together and organize plant floor data with other enterprise information allowing customers to improve the efficiency and quality of their operations by making better informed decisions.


Status Enterprise provides greater scalability, data modeling and support for HTML 5 and mobile devices.


Although Status Enterprise was released in January of 2014, our marketing campaigns were not fully launched until the spring of 2014. The sales cycle for these type systems is often nine months or more, as such, sales of Status Enterprise have just started to have an impact on our operations.


While Status Enterprise has been deployed internally behind the firewall of corporate networks, it can also be installed on hosted servers on the web. This allows users to bring data into the system from many different devices located anywhere. The HTML 5 support allows the data to be visualized on almost any device. As such, Status Enterprise is a true IoT solution. Starting in February of 2015, B-Scada has begun to present Status Enterprise as an IoT platform known as VoT (Virtualization of Things). The intent of this platform is to open additional markets to B-Scada products, markets that may not be realized if our systems were marketed as SCADA only.


Status Machine Edition and Status Enterprise are 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.


Consulting

In addition to sales of the Status products, we generate revenue by providing consulting services to companies that wish to extend and customize our technology. We provide .Net development and screen design services. We also offer training on our systems and graphic design services.  


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 providing substantial income for us for years to come.  We have several 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, smart grid, building automation 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.




16




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 as well as providing for real-time business process management data to executive-level personnel. 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. Additional capital may be needed to finance such 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.


One new area B-Scada is looking at is IoT (Internet of Things). The software products we offer fit very well with this new growth industry. In 2015 we have started new marketing and product initiatives in this space using our existing technology. From various trade shows we have attended, it has become obvious that many potential IoT customers are looking for turnkey solutions and do not want to develop them themselves. We will be investigating offering additional products alongside our software, including sensors, and will be expanding our efforts to partner with other companies in the IoT space to help deliver more complete solutions to the market.


Revenue Strategy

We are currently generating revenues by licensing portions of our technology to different software companies, technology they use in their software products. These are long term arrangements providing consistent annual revenue to B-Scada. We also sell our SCADA software products to system integrators and commercial customers for visually monitoring and archiving their industrial data. Often, we are asked to provide technical expertise in the form of software development, graphics design and consulting services along with the software we provide our customers.


We currently sell our products directly over the Internet from our website and through resellers to end users and system integrators. Our IoT initiatives include offering hosted services through a SAAS (Software as a Service) model.


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 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.




17



Results of Operations


Comparison of the Three Months Ended January 31, 2015 and 2014


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


 

For the three months ended January 31,

 

2015

 

2014

 

[Unaudited]

 

[Unaudited]

 

 

 

% of

 

 

 

% of

 

Amounts

 

Revenues

 

Amounts

 

Revenues

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

  Technology licensing and support

$

443,853

 

89%

 

$

269,800

 

80%

  Commercial software

 

52,291

 

11%

 

 

65,972

 

20%

    Total revenues

$

496,144

 

100%

 

$

335,772

 

100%

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

  Technology licensing and support

$

85,116

 

17%

 

$

25,783

 

8%

  Commercial software

$

86,908

 

18%

 

$

25,876

 

8%

  Sales and marketing

$

145,309

 

29%

 

$

76,233

 

23%

  Research and development

$

26,129

 

5%

 

$

58,815

 

17%

  General and administrative

$

362,370

 

73%

 

$

126,468

 

38%

 

 

 

 

 

 

 

 

 

 

  Interest expense

$

1,464

 

--%

 

$

--

 

--%

  Benefit from income taxes

$

(66,318)

 

(13)%

 

$

--

 

--%

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

(148,548)

 

(30)%

 

$

21,489

 

6%

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share

$

(0.01)

 

 

 

$

--

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per common share

$

(0.01)

 

 

 

$

--

 

 


Revenues


Our revenues for the three months ended January 31, 2015 amounted to $496,144 compared to fiscal 2014 revenues of $335,772, an increase of $160,372 (48%). Some of this increase was due to revenues from our Spanish branch, others from technology licensing. In fiscal 2015, we had increases in technology licensing revenues ($26,242) and development and support revenues ($147,811) of $174,053 which were offset by a decline in commercial software revenues of $13,681. The decline in commercial software revenues was expected. Demand for Microsoft Silverlight based products has decreased as Microsoft has announced that they will no longer be focusing on this technology as their main web strategy. Our Machine Edition product is Silverlight based and we have seen demand for this product drop.


We have completed the process of transitioning to Status Enterprise to be our primary product focus. Status Enterprise was fully launched in the spring of 2014. With a nine month sales cycle, revenue from this product started to materialize towards the end of 2014.  While we have many pilot projects in place and growing interest in the system, the number of licenses purchased on each sale has been small. This is due to customers being cautious as this is a new platform. Many of the initial customers have indicated additional licenses will be required as their projects transition from pilot to production, so we expect an increase in the license sales in future quarters. Interest in the system, both from SCADA and IoT prospects, has been increasing. We are confident that the system will be successful.






18




We entered into two new long-term licensing agreements at the end of the first quarter of fiscal 2013.  In fiscal 2015 and 2014, customer development services from these customers accounted for most of the increase in technology licensing and support revenues. Demand for these services was strong through the quarter, but is expected to decline over the course of the year as customers in the oil and gas industry have indicated they need to reduce expenditures.  We continue to implement our strategic goals to generate increased revenues from the sales of our products and services, which accounted for the balance of our revenue growth.  Service revenues include revenues from fees charged for the implementation of our software products and training of customers in the use of such products. We are currently selling our software over the internet and are marketing our products and services to companies which may want to license or joint venture some of our software applications. New product and services revenue from our IoT initiatives will begin to influence our revenue towards the end of 2015. Revenues from our office in Spain have contributed to our revenue growth this quarter, but are not expected to be a significant contribution until 2016. In the three months ended January 31, 2015, Spain generated $38,440 in technology licensing and support revenues and $7,521 in commercial software revenues.


Operating Expenses


Technology licensing and support costs and commercial software costs consist primarily of payroll and related expenses. Technology licensing and support payroll costs amounted to $48,571 ($7,691 Spain) in the three months ended January 31, 2015 compared to $25,783 in the three months ended January 31, 2014 an increase of $22,788 (88%). Additionally, in fiscal 2015 we had costs for hardware of $36,545 ($34,349 Spain). Commercial software costs amounted to $86,908 in the three months ended January 31, 2015 compared to $25,876 in the three months ended January 31, 2014 an increase of $61,032 (236%). These increased costs result from our adding new personnel to service our new business. It is also due to us moving more of our operations to the cloud, including moving to a new accounting system, email and document storage.


As a percentage of technology licensing and support revenues the related costs increased to 19% in fiscal 2015 as compared to 10% of such revenues in fiscal 2014. This increase is a result of hardware sales which have low margins. Commercial software costs were 166% of commercial software revenues in fiscal 2015 compared to 39% in fiscal 2014. This was a result of our decrease in such revenues in fiscal 2015. Overall these costs represented 35% of fiscal 2015 revenues compared to 15% of fiscal 2014 revenues.


Sales and marketing costs have increased to $145,309 in the three months ended January 31, 2015 from $76,233 in the three months ended January 31, 2014, an increase of $69,076 (91%). Payroll and related costs increased to $67,659 ($12,452 Spain) from $40,157 and advertising, marketing and trade shows increased to $68,778 from $27,296. This was due to new marketing initiatives that were identified when we received proceeds from the investment into the company in the summer of 2014. We intend to increase our marketing activities and costs in 2015 since we believe it is necessary to market our products and services in order to accomplish our plan for revenue growth.


Research and development costs decreased to $26,129 in the three months ended January 31, 2015 from $58,815 in the three months ended January 31, 2014, a decrease of $32,686 (56%). While we continue our research and development, payroll and related costs have decreased from fiscal 2014.


General and administrative costs increased to $362,370 in the three months ended January 31, 2015 from $126,468 in the three months ended January 31, 2014, an increase of $235,902 (187%). The increase was primarily related to increases in payroll and related costs, which increased to $141,153 ($21,876 Spain) from $78,059, a result of increased administrative duties as our business continues to grow, and a one-time charge related to the establishment of our office in Spain of $144,606.  We have also seen increases in all aspects of costs related to our public filings and SEC requirements.


Interest and Debt Costs


Interest expense of $1,464 in the three months ended January 31, 2015 relates to the mortgage on our office building. There is no interest in the three months ended January 31, 2014




19




Income Tax Benefit


Prior to the year ended October 31, 2013 the deferred tax asset arising from pre-tax losses had been fully reserved as we were not able to determine that it was more likely than not that we would be able to realize the tax benefits in the future. Based on our evaluation of the positive and negative evidence at October 31, 2014 and 2013, management determined that the Company would utilize its net operating loss carry forwards in future periods and that it was "more likely than not" that it would utilize its deferred tax assets. As a result, management elected to reduce the Company's deferred tax asset valuation allowance by $490,749 and $406,744 as of October 31, 2014 and 2013, respectively. In the three months ended January 31, 2015, we recorded a deferred income tax benefit of $66,318, $11,067 related to US operations and $55,251 related to Spanish operations.  


Net Income


Net loss in the three months ended January 31, 2015 totaled $148,548 ($128,876 Spain) compared to net income of $21,489 in the three months ended January 31, 2014, a decrease of $170,037 as discussed above.


Liquidity and Capital Resources


We currently fund our operations through sales of our products and services and when necessary through sales of equity and debt securities.


At January 31, 2015, we had cash and cash equivalents of $1,586,932 compared to $1,144,915 at October 31, 2014. The increase of $442,017 is primarily attributable to cash generated from operations.


Cash Flows


Net cash provided by operating activities amounted to $450,460 and $453,391 in the three months ended January 31, 2015 and 2014, respectively. Net cash from operations remained constant as our increased revenues were offset by increased operating costs, including the cost of opening our Spanish office, while we implemented our overall strategic business plan.


In fiscal 2015 and 2014, cash was used for investing activities for the acquisition of property and equipment in the amount of $1,505 and $1,238, respectively. Additionally, in fiscal 2014 we paid $10,000 for a deposit on the purchase of our new office facility which we purchased in the second quarter of fiscal 2014.


In fiscal 2015 financing activities, we used $3,940 in cash for principal payments on the mortgage incurred from the purchase of our new office facility. There were no fiscal 2014 financing activities.


We believe that our cash on hand at January 31, 2015 and 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. 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.













20



Deferred Tax Asset Valuation Allowance


Accounting standards require that we assess whether a valuation allowance should be established against our deferred tax asset based on the consideration of all available evidence using a "more likely than not" standard. In making such judgments, we considered both positive and negative evidence as well as other factors which may impact future operating results. From our inception through October 31, 2012, we had established a full valuation allowance on our deferred tax asset because of a lack of sufficient positive evidence to support its realization.  At October 31, 2014 and 2013, based on its evaluation of the positive and negative evidence, management determined that the Company would utilize its net operating loss carry forwards in future periods and that it was "more likely than not" that it would utilize its deferred tax assets. The positive evidence evaluated as of October 31, 2014 and 2013 consists of (i) our increased revenues, including the signing of several long term licensing agreements which run through fiscal 2019; (ii) our positive earnings, beginning in fiscal 2011 and increasing in each of fiscal 2012 through 2014; (iii) our ability to maintain operating costs as we have grown revenues; (iv) the utilization of net operating loss carry forwards in the last four fiscal years. The negative evidence evaluated as of October 31, 2014 and 2013 consists of (i) our history of operating losses from inception through fiscal 2010; (ii) the possibility that a licensing agreement is cancelled or that non licensing revenues will decline; (iii) the possibility that our operating costs will increase. As a result, management elected to reduce the Company's deferred tax asset valuation allowance by $490,749 and $406,744 as of October 31, 2014 and 2013, respectively.


Contractual Obligations


Not Applicable


Off-Balance Sheet Arrangements


As of January 31, 2015, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.


Recent Accounting Pronouncements


In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers” (Topic 606), which supersedes the revenue recognition requirements in ASC Topic 605, “Revenue Recognition”, and most industry-specific guidance. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.  The amendments in the ASU will be applied using one of two retrospective methods. The effective date will be the first quarter of our fiscal year ended October 31, 2018. We have not determined the potential effects on our consolidated financial statements.


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.


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.



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(b) Managements 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.


Management has assessed the effectiveness of our internal control over financial reporting as of January 31, 2015.  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, 2015.  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, 2015.  Managements assessment identified the following material weaknesses:

·

As of January 31, 2015, 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 January 31, 2015, there was a lack of segregation of duties, in that we only had one person performing all accounting-related duties.

·

As of January 31, 2015, there were no independent directors and no independent audit committee.


We continue to evaluate the effectiveness of internal controls and procedures on an on-going basis.  We will address these concerns in time, taking into consideration the Company’s size and its available resources.


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.

















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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 of B-Scada, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a)) (furnished herewith).

 

 

31.2

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

 

 

32.2

Certification by the 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 12, 2015

By:

/s/  Allen Ronald DeSerranno

  

  

Allen Ronald DeSerranno

Chief Executive Officer






































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