10-K 1 mobiformsoftware10k103110.htm mobiformsoftware10k103110.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

FORM 10-K
 
Mark One
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 2010
 
OR
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
 
Commission File Number: 000-51717
 
MOBIFORM SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
 
DELAWARE
   94-3399360
(State or other jurisdiction of incorporation or organization)    (I.R.S. Employer Identification No.)
     
  1255 N. Vantage Pt. Dr., Suite A, Crystal River, Florida 34429  
  (Address of principal executive offices) (Zip Code)  
 
Registrant’s telephone number, including area code (352) 564-9610

Securities registered under Section 12(b) of the Exchange Act: None
 
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.0001 Par Value
 (Title of class)

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

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     o Yes     x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      x Yes      o 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).          oYes    o No
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     x
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
 
o Large accelerated filer oAccelerated filer o Non-accelerated filer x Smaller reporting company
    (Do not check if a small reporting company)  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    o Yes    x No
 
The aggregate market value of the common stock held by non-affiliates of the registrant, computed based upon prices at which it was last sold, as of the last business day of the registrant’s second fiscal quarter, April 30, 2010, was approximately $       1,713,623.
 
According to the records of the registrant's registrar and transfer agent, the number of shares of the registrant's common stock outstanding as of January 24, 2011 was 24,586,672.
 

TABLE OF CONTENTS
 
 
Page No.
   Part I
 
   
4
   
8
   
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14
   
14
   
   Part II
 
   
14
   
16
   
16
   
24
   
25
   
25
   
26
   
26
   
   Part III
 
   
27
   
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30
   
31
   
   Part IV
 
   
32


NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This report and the documents incorporated in it by reference contain forward-looking statements that involve known and unknown risks and uncertainties. Examples of forward-looking statements include: projections of capital expenditures, competitive pressures, revenues, growth prospects, product development, financial resources and other financial matters. You can identify these and other forward-looking statements by the use of words such as “may,” “will,” “should,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “potential” or the negative of such terms, or other comparable terminology.
 
Our ability to predict the results of our operations or the effects of various events on our operating results is inherently uncertain. Therefore, we caution you to consider carefully the matters described in this report, the documents incorporated by reference in this report, and other publicly available sources. These factors and many other factors beyond the control of our management could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by the forward-looking statements.
 

PART I
 

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

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

HMI and SCADA systems are used for monitoring the HVAC (Heating Ventilation and Air Conditioning) systems in large commercial complexes. They are used in waste water treatment plants, with oil wells, hydro electric plants, subway systems, pharmaceuticals and almost every manufacturing facility including the making of prepared food.
 
During the fiscal year ended October 31, 2010, after our five year development phase, we began to commercialize our products.  We focused on presenting and demonstrating the industrial applications of our software, resulting in our entry into two significant multi-year licenses.  We initiated and pursued numerous additional potential major licensing opportunities and expanded our retail distribution network of resellers throughout the world.
 
History
We were originally formed under the name Firefly Learning, Inc. on May 31, 2001. In October, 2005, pursuant to an exchange agreement we acquired all of the issued and outstanding shares of capital stock of Mobiform Software, Ltd., a Canadian corporation, (“Mobiform Canada”) in exchange for shares of our Common Stock.  After the Acquisition, Mobiform Canada became a wholly-owned subsidiary of Mobiform.  Mobiform and Mobiform Canada are collectively referred to herein as “Mobiform.” Effective September 14, 2010, Mobiform Canada was dissolved.
 
Our technology team is comprised of seasoned veterans of software design and development who have extensive experience in designing, building and delivering world-class software solutions. We have licensed or provided training and/or consulting services to such major companies as Microsoft Corporation, Intel Corporation, Siemens AG, and InvestorForce, Inc.
 
Product Description
We develop and sell software designed for use by graphic designers, computer programmers, and ordinary users of computers and the Internet.  Our primary line of HMI (Human Machine Interface) software and SCADA (Supervisory Control and Data Acquisition) products is a set of programs that allows users to generate “user interfaces.”  User interfaces include internet web sites and computer applications of all kinds, including computer models of simple and complex systems (for example, a functioning power plant, the flow of inventory of a large business, the genetic code of a species or individual, or a simple lever) and computer video games.  Given the great and increasing pervasiveness of user interfaces in the world economy, the demand for products that allow for the simple and flexible creation of user interfaces is enormous.
 
Our products can be utilized by many vertical markets. We have already entered into agreements with companies to use our technology in the fields of Industrial Automation, Medical Software, and Energy Monitoring.
 
 
Revenue Streams
 
Mobiform’s revenue is generated from three sources, (i) retail sales of our HMI and SCADA software products, (ii) licensing of our technology to other companies, and (iii) development services and support.

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

Mobiform has attracted a number of resellers and system integrators that are now promoting and using ‘Status’ in commercial settings. During the year ended October 31, 2010 we have materially increased our international reseller network.  We believe that this will result in greater sales and distribution of our software through retail outlets and OEMs. We are also targeting potential customers to offer customized applications to meet their industry requirements.   Status is now being used to monitor the 4th largest subway system in the world in Seoul, South Korea. It is monitoring HVAC performance in pharmaceutical manufacturing facilities in China, and is on some of the most sophisticated offshore drilling ships in the Gulf of Mexico.

Development of SCADA systems typically requires millions of dollars in development capital over several years. Larger firms cannot develop their own systems with the efficiency of smaller companies; a larger firm trying to develop such a system in house could easily spend $15 million or more.
 
Technology Licensing
 
In addition to selling its own software products, Mobiform also licenses the technology it has developed to other software companies. Long-term licenses to multinational automation software companies are a major part of our business.  The lead time for our engineers to work with theirs in developing successful integration of our software with their future products is fairly long—from nine months to two years.  But the result is a multiyear high revenue license which provides substantial revenue to us for years and years.  We are have a number of agreements in place and are currently in discussions with additional companies in the oil and gas, oil service, electric power generation and mining industries.

The products developed using Mobiform technology includes industrial automation solutions, medical applications for use in hospitals, smart grid, HVAC and line of business applications. The relationships established through licensing are very strategic and may lead to acquisitions to prevent competitive companies from having the same strategic benefits.
 
Development Services and Support
 
Mobiform has been recognized as a leading edge software development firm. Mobiform is often asked to provide software development services, graphics design and consulting as part of the technology licensing agreements it signs with its customers.
 
Although we are a small early stage business, we have very high goals, which may or may not ever be achieved.
 
 
Our go-to-market strategy is simple: For Stage 1, following in the footsteps of Corel, Adobe and Macromedia, our goal is to put in place a set of core technologies that we can leverage to create a variety of software applications for different vertical markets. We have made some of these components available to other software companies as either retail software development components or as toolkits that can be used to embed our technology into their solutions. We have offered free downloads of our components and toolkits to prospective customers. With thousands of downloads of our products globally, we believe Mobiform is well on its way to achieving brand-name recognition.  We will continue in our efforts to generate incremental revenue by working with global industry leaders in selling consulting services and licensing our technology.
 
Now that we are equipped with the technology infrastructure developed during Stage 1, we find that developing highly interactive and powerful software is simplified.  Now in Stage 2 we are moving our business focus from technology development to product development.  During this stage, we are beginning to develop software products for industry verticals in sectors such as Industrial Automation, Digital Signage, Healthcare and Geographic Information Systems.  We are in discussions with major companies engaged in offshore drilling platforms, mining, electric power generation and heavy industry automation, among others.  With a powerful set of software components in our tool belt, we believe we are able to build software products more rapidly and at a lower total cost of ownership to the consumer.  Products are created through two different scenarios, (i) in-house creation of our own consumer products; and (ii) integration into third party products.  Both scenarios should result in additional licensed sales of our technologies and products.
 
The third part of the strategy is a feedback loop. By providing a limited amount of consulting services, Mobiform is able to identify potential software products and components that are needed by industry, and produce those products for market. These components will feed our technology base, and the relationships developed from the consulting will provide potential sales channels and additional licensing and original equipment manufacturers’ (OEM) agreements to us.

Market Information
Our immediate industry focus relates to the following verticals:
 
Industrial Automation and Control Systems — Our team had experience with Rockwell Automation and as such we have chosen Industrial and Process control as the first vertical we have targeted. We released the  new product in this vertical in January 2009 and have already licensed some of our technology to companies in this space.
 
Digital Signage — Our graphics design and real time data connectivity makes our products suitable for digital signage solutions.
 
We believe that our HMI and SCADA software will also find applications in other markets, such as advertising, education, e-learning, engineering, exploration, financial, gaming, healthcare, media, mobility, oil and pharmaceutical.
 
Raw Materials and Suppliers
Since our products are principally intellectual property, raw material sources and availability are not significant to us.  We will, however, be in competition with all other technology firms in attracting and retaining software engineering talent for Microsoft Windows developers, particularly those involved in .NET development. These resources are in extremely high demand and competition for these resources is significant.
 
 
Limited Customer Base
We currently have only a few customers and limited revenue, but the two licenses executed during our most recent fiscal year are expected to generate a minimum of  400% of our average revenue in 2008 and 2009.  We are endeavoring to retain the customers we have while we seek to broaden our customer base.  The loss of these customers would have a material effect on our business, financial condition and results of operations. There is no assurance that we will succeed.
 
Protection of Intellectual Property
We have applied for trademarks for our logos and product names. We will consider patent applications as they are warranted and our resources allow. Our future success and our ability to compete may greatly depend on our proprietary technology. We therefore rely on trade secret laws, together with non-disclosure agreements and licensing agreements to establish and protect whatever proprietary rights that we may have. We also used Microsoft’s technology to build our Aurora XAML Designer. This, combined with Microsoft’s redistribution of shared information through marketing and authoring, may put us at risk.
 
Government Approval and Regulation
Our products and services do not require government approval and are not regulated by the government.

Cost and Effects of Compliance with Environmental Laws
We do not have any material costs or involvement with compliance with environmental laws.

Employees
We have ten full-time employees, which includes four programmer product developers, two graphic designers, one sales and marketing representative and two administrative. We are planning to expand, especially in sales and marketing, both through additional personnel and developing external distribution channels. We also plan to recruit a full-time Chief Financial Officer. We are discussing the possibility that one or more of our customers may become a distribution channel for our products.
 
Reports to Security Holders
Since the effectiveness of the S-1 registration statement  we have been filing reports under the Securities Exchange Act of 1934 and plan to continue to file such reports. The public may read and copy any materials we file with or or furnish to the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1–800–SEC–0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov. Although it is not part of this report, you may find additional information about us at our website, http://www.mobiform.com, where our products are discussed in more detail.  This year we are providing an Annual Report to Shareholders which elaborates on our recent, current and planned business activity.  A copy of the Annual Report to Shareholders can be found on our website.  In addition, we will email a copy to our shareholders and any one else who requests one from Kathleen O’Keefe, Investor Relations,  Tel: (352) 564-9610; email: kokeefe@mobiform.com.
 
 
 
An investment in our shares is speculative and involves a high degree of risk. Therefore, you should not invest in our shares unless you are able to bear a loss of your entire investment. You should carefully consider the following factors as well as the other information contained herein before deciding to invest in our shares. Factors that could cause actual results to differ from our expectations, statements or projections include the risks and uncertainties relating to our business described above. This report and statements that we may make from time to time may contain forward-looking information. There can be no assurance that actual results will not differ materially from our expectations, statements or projections.
 
Risk Factors Relating to Our Business
 
Although our cash flow has greatly improved during the last fiscal year, our limited cash balance will only permit us to operate for a limited time, unless our revenues rise substantially or we obtain additional financing soon.
As of January 24, 2011 we had a cash balance of $210,000, accounts receivable of $72,000 and accrued liabilities of $96,000 , for a total of $186,000 in net current operating assets.  Unless we obtain cash from revenues and/or a financing, our current operating assets would be exhausted in 2.5 months at our cash “burn” rate of $75,000 experienced during our last fiscal year.  Our independent auditors have qualified their opinion on our financial statements, expressing substantial doubt whether we can continue as a going concern, in light of the uncertainty of our obtaining additional financing on a timely basis and other factors described in Note 2 to the financial statements in this report.
 
We have a limited operating history and limited historical financial information upon which you may evaluate our performance.
You should consider, among other factors, our prospects for success in light of the risks and uncertainties encountered by companies that, like us, are in their early stages of development. We may not successfully address these risks and uncertainties or successfully implement our existing and new products and services. If we fail to do so, it could materially harm our business and impair the value of our Common Stock. Even if we accomplish these objectives, we still may not generate positive future cash flows or profits.
 
Unanticipated problems, expenses and delays are frequently encountered in developing new products and services. These include, but are not limited to, inadequate funding, lack of consumer acceptance, competition, product development, and inadequate sales and marketing. Our failure to meet any of these conditions would have a materially adverse effect upon us and may force us to reduce or curtail operations. No assurance can be given that we can or will ever operate profitably.
 
We have incurred losses since inception and we may be unable to achieve profitability or generate positive cash flow.
We have incurred substantial net losses since our inception and may be unable to achieve profitability in the future. If we continue to incur losses, we may be unable to implement our business plan described herein, including the following:
 
   • increase the number of products we sell

   • increase our sales and marketing activities, including employment of additional sales personnel

   • acquire additional businesses.
 
As of October 31, 2010 we had an accumulated deficit of $7,367,781. We may not achieve profitability if our revenues increase more slowly than we expect, and/or if operating expenses exceed our expectations or cannot be adjusted to compensate for lower than expected revenues. If we do achieve profitability, we may be unable to sustain or increase profitability on a quarterly or annual basis. Any of the factors discussed above may adversely affect our stock price.
 
 
We may not accurately anticipate the timing of the market needs for our products and develop such products at the appropriate times, which could harm our operating results and financial condition.
Accurately forecasting and meeting our customers’ requirements is critical to the success of our business. Forecasting to meet customers’ needs is particularly difficult in connection with newer products and products under development. Our ability to meet customer demand depends in part on our ability to configure our product applications to the complex architecture that our customers have developed and the availability of skilled labor to address our customers’ needs. If we fail to meet customers’ supply expectations, our net revenues will be adversely affected, and we will likely lose business.
 
The failure to develop additional distribution channels to market and sell our products will impact the viability of our company.
The majority of our sales to date have been direct sales to a relative few companies. Although we have begun to seek additional distribution channels, we have not yet generated significant revenues. Although we intend to obtain distributors and resellers, we may not succeed in marketing our products to their customers.
 
Our future operations may depend on our ability to obtain additional financing.
We have historically financed our operations through equity investments and/or the sale of convertible promissory notes and from cash generated from sales. Since we will require additonal financing to continue our operations, if we are unable to raise additional funds, our ability to go forward with our business plan may be severely hampered. We cannot assure you that if we are required to raise additional debt or equity financing in the future that we will be able to obtain such financing on satisfactory terms, if at all. If, in the future, we issue any additional equity or convertible debt securities, we may substantially dilute the interests of our current stockholders. If our future capital requirements are greater than the cash we obtain from our business and/or available financing, we may, among other things, be required to significantly reduce our product development, commercialization, marketing or other activities or even cease operations.
 
Our future operating results are unpredictable.
In part because of our limited operating history and our untested business model, it is not possible to accurately forecast our future revenues, or results of operations. We have no meaningful historical financial data upon which to base planned operating and capital expenditures, and our sales and operating results are difficult to forecast. A variety of factors may cause our future operating results to fluctuate significantly. Many of these factors are outside of our control. They include: (i) the effectiveness of our sales and marketing efforts; (ii) market acceptance of our services and products; (iii) the amount and timing of our operating costs and capital expenditures; (iv) introductions by our competitors of new or enhanced services or products; (v) availability of sufficient financing on terms acceptable to us; (vi) changes in our management team and key personnel; and (vii) fluctuations in general economic conditions and economic conditions specific to the areas in which we intend to market our technology. One or more of these factors could materially and adversely affect gross margins and operating results in future periods.
 
We depend on a small number of customers for revenue.
Most of our incremental revenue has been contributed through a small number of our employees working directly with relatively few companies on product customizations to meet their needs. Some of those active relationships may end shortly. We are actively seeking new clients to either consult with on new technology or embed our technology and other product components into their solutions or seek new clients who are willing to pay us to customize our technology and other products to meet their needs. Although we have entered two of these license agreements recently, we cannot give you any assurance that we will be successful in developing a profitable customer base.
 
 
Between the initial introduction of XAML (“Extensible Application Markup Language”) and now, a number of companies have started developing similar technologies, creating competition for us.
The number of competitors is bound to grow as time goes on. We cannot guarantee that we will remain a leader in our field. Our competitors also have strong product offerings and are actively marketing their technology. Most of the entities with which we compete or will compete with in the future have substantially greater financial resources, sales and personnel than we have. Moreover, there can be no assurance that other companies will not enter the marketplace or that other companies will not produce products superior to ours.
 
Microsoft may lose market share because it typically offers closed standards relative to its technology, which could adversely affect us.
Open Operating System (OS) standards are gaining momentum in Europe which could negatively impact our growth potential. XAML is currently not open standards based and therefore, many European companies are investing in Open Standard technologies such as SVG. While we believe we can capitalize on these opportunities, we also believe that we should devote our efforts and financial resources in XAML, based upon what we perceive to be its anticipated demand and global deployment. While we believe Microsoft will remain the dominant leader in the sectors it works in, no assurance can be given that similar or better technologies will not be developed which, if developed, would have a material adverse effect on our business, financial condition and results of operations.
 
We may accidentally infringe on the intellectual property rights of third parties.
We have trademarked “Real time-real easy,” “Software development isn’t what we do. It’s who we are.” “Vantage Point WPF Controls” and “Status.”  We have also patented one element in our SCADA software.  We have not otherwise patented or trademarked any of our technology, logos or trademarks. Our future success and our ability to compete may greatly depend on our proprietary technology. We therefore rely on trade secret laws, together with non-disclosure agreements and licensing agreements to establish and protect whatever proprietary rights that we may have. We also used Microsoft’s technology to build our Aurora XAML Designer. This, combined with its redistribution of shared information through marketing and authoring, may put us at risk. In the future, and to the extent we are successful in raising additional capital, we may allocate a portion of those proceeds to intellectual property protection. To date, retaining patent counsel has been too costly and establishing trade patents would have been too time consuming. Therefore, we cannot assure you that our efforts will successfully protect our technology because: (i) the laws of some foreign countries may not protect our proprietary rights as fully as do the laws of the United States and Canada; (ii) if a competitor were to infringe on our proprietary rights, enforcing those rights may be time consuming and costly, diverting management’s attention and its resources; (iii) measures like entering into non-disclosure agreements afford only limited protection; (iv) unauthorized parties may attempt to copy aspects of our products and develop similar products or obtain and use information that we regard as proprietary; and (v) our competitors may independently develop or patent technologies that are substantially equivalent or superior to our technology, duplicate our technologies or design around our intellectual property rights. In addition, others may assert infringement claims against us. The cost of defending infringement claims could be significant, regardless of whether the claims are valid and no assurance can be given that we will have the financial ability to defend any such claims.
 
Our products may contain defects that may be costly to correct, delay market acceptance of our products and expose us to litigation.
Despite testing by us, errors may be found in our software products. If defects are discovered, we may not be able to successfully correct them in a timely manner or at all. Defects and failures in our products could result in a loss of, or delay in, market acceptance of our products and could damage our reputation. Although our standard license agreement with our customers contains provisions designed to limit our exposure to potential product liability claims, it is possible that these provisions may not be effective or enforceable under the laws of some jurisdictions, and we could fail to realize revenues and suffer damage to our reputation as a result of, or in defense of, a substantial claim. We currently do not carry product liability insurance for our products.
 
 
We are vulnerable to software failures, which could harm our reputation and cause our customers to seek reimbursement from us and take their business to another provider.
The software products that we distribute must be able to perform on customer/client servers and be properly managed around the clock without interruption. Our support operations depend upon our ability to supply our customers with telephone and e-mail assistance and our support center may suffer damages emanating from human error, force majeure, power loss, telecommunications failures, sabotage, intentional acts of vandalism and similar events. Future interruptions could:

   • cause customers or end users to seek damages for losses incurred;
 
   • require us to replace existing equipment or add redundant facilities;
 
   • damage our reputation for reliable service;
 
   • cause existing customers to cancel their contracts; or
 
   • make it more difficult for us to attract new customers.
 
We have not voluntarily implemented various corporate governance measures, in the absence of which, stockholders may have more limited protections against interested director transactions, conflicts of interest and similar matters.
Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the New York Stock Exchange or The Nasdaq Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges are those that address board of directors’ independence and audit committee oversight. We have not yet adopted any of these corporate governance measures, and since our securities are not yet listed on a national securities exchange, we are not required to do so. We have not adopted corporate governance measures such as an audit or other independent committees of our board of directors. It is possible that if we were to adopt some or all of these corporate governance measures, stockholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees may be made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions.
 
We may be exposed to potential risks relating to our internal control over financial reporting .
Section 404 of the Sarbanes-Oxley Act of 2002 requires public companies to include a report of management on the company’s internal control over financial reporting in their annual reports, including Form 10-K.  In addition, in the event that our independent registered public accounting firm is unable to rely on our internal controls in connection with their audit of our financial statements, and in the further event that they are unable to devise alternative procedures in order to satisfy themselves as to the material accuracy of our financial statements and related disclosures, it is possible that we would receive a qualified or an adverse audit opinion on those financial statements which could also adversely affect the market price of our Common Stock and our ability to secure additional financing as needed.
 
 
If we lose key employees or are unable to attract and retain qualified personnel, our business could suffer.
Our future success will depend on the continued contributions of Ron DeSerranno, our CEO, President and Director, who is responsible for programming decisions, design changes, enhancements and strategies. We have “key person” life insurance in the amount of $500,000 on Mr. DeSerranno. Nevertheless the loss of Mr. DeSerranno would likely have a material adverse effect on our business, financial condition and results of operations. We also rely on a very small complement of highly skilled employees. If one or more of them cease to work for us, it would have serious negative consequences. Our future success and plans for growth also depend upon our ability to expand our Board of Directors and to attract, train and retain personnel in all areas of our business.

We may need additional funds in the future. We may be unable to obtain additional funds or if we obtain financing it may not be on terms favorable to us. You may lose your entire investment.
Based on our current plans, we believe our existing cash and cash equivalents along with cash generated from operations will be sufficient to fund our operating expenses and capital requirements through April 30, 2011, although there is no assurance of this result, we may need funds in the future. If our capital resources are insufficient to meet future capital requirements, we will have to raise additional funds by selling Company shares. If we are unable to obtain additional funds on terms favorable to us, we may be required to cease or reduce our operating activities.  If we raise additional funds by selling additional shares of our capital stock, the ownership interests of our stockholders will be substantially diluted.

Risk Factors Relating to our Common Stock
 
Our stock trades on the Over the Counter Bulletin Board quotation system.
The Company’s Common Stock currently trades on the Over the Counter Bulletin Board electronic quotation system under the symbol “MOBS.” The Over the Counter Bulletin Board is a decentralized market regulated by the Financial Industry Regulatory Authority in which securities are traded via an electronic quotation system.  There can be no assurance that a trading market for the Company's shares will continue to exist in the future, and there can be no assurance that an active trading market will develop or be sustained. The market price of the shares of Common Stock is likely to be highly volatile and may be significantly affected by factors such as actual or anticipated fluctuations in the Company's operating results, announcements of technological innovations, new products or new contracts by the Company or its competitors, developments with respect to proprietary rights, adoption of new government regulations affecting the environment, general market conditions and other factors. In addition, the stock market has from time to time experienced significant price and volume fluctuations that have particularly affected the market price for the common stocks of software and technology companies. These types of broad market fluctuations may adversely affect the market price of the Company's common stock. See Risk Factor “Our stock price may be highly volatile” below.
 
Our shares of common stock are thinly traded, so stockholders may be unable to sell at or near ask prices or at all if they need to sell shares to raise money or otherwise desire to liquidate their shares.
Our common stock has from time to time been “thinly-traded,” meaning that the number of persons interested in purchasing our common stock at or near ask prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we become more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give stockholders any assurance that a broader or more active public trading market for our common shares will develop or be sustained, or that current trading levels will be sustained.
 
 
Our common stock will be subject to “penny stock” rules which may be detrimental to investors.
If our common stock is not listed on a national exchange or market, the trading market for our common stock may become illiquid. Our common stock trades on the over-the-counter electronic bulletin board and, therefore, is subject to the requirements of certain rules promulgated under the Securities Exchange Act of 1934, which require additional disclosure by broker-dealers in connection with any trades involving a stock defined as a "penny stock."  The Securities and Exchange Commission has adopted regulations which generally define "penny stock" to be any equity security that has a market price (as defined) of less than $5.00 per share or an exercise price of less than $5.00 per share. The securities will become subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities. For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchaser of such securities and have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market. Finally, among other requirements, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Consequently, the "penny stock" rules may restrict the ability of purchasers in this offering to sell the Common Stock offered hereby in the secondary market.
 
We do not anticipate paying any dividends.
No dividends have been paid on the common stock of the Company. The Company does not intend to pay cash dividends on its common stock in the foreseeable future, and anticipates that profits, if any, received from operations will be devoted to the Company's future operations. Any decision to pay dividends will depend upon the Company's profitability at the time, cash available and other relevant factors.
 
Our stock price may be highly volatile.
The market price of our common stock, like that of many other software and technology companies, has been highly volatile and may continue to be so in the future due to a wide variety of factors, including:

 
·
announcements of technological innovations by us, our collaborative partners or our present or potential competitors;
 
 
·
our quarterly operating results and performance;

 
·
developments or disputes concerning patents or other proprietary rights;
 
 
·
acquisitions;

 
·
litigation and government proceedings;
 
 
·
adverse legislation;

 
·
changes in government regulations;
 
 
·
economic and other external factors; and

 
·
general market conditions.

 
 
Our executive offices and research and development facilities are located in Crystal River, Florida. We rent a 2,000 square foot office and research facility at a variable monthly rent capped at $4,000. The lease on this facility expired June 1, 2010.  We continue to occupy the facility based upon a month-to-month verbal lease.  This facility is sufficient for our current needs, but we may obtain bigger facilities as we carry out our business strategy.
 
 
The Company is not a party to, and its property is not the subject of, any pending legal proceedings.
 
Item 4. Submission of Matters to a Vote of Security Holders
 
None
 
PART II
 
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities
 
Market Information
 
Currently our Common Stock is quoted on the Over the Counter Bulletin Board (OTCBB) under the symbol MOBS. The reported high and low sales prices for the common stock as reported on the OTCBB are shown below for the periods indicated. The quotations reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not represent actual transactions.

   
High
    
Low
  
2009
            
Fourth quarter ended October 31, 2009
     0.70       0.18  
2010
                
First quarter ended January 31, 2010
     0.22       0.09  
Second quarter ended April 30, 2010
     0.20       0.09  
Third quarter ended July 31, 2010
     0.12       0.05  
Fourth quarter ended October 31, 2010
     0.05       0.04  
2011
                
First quarter ended January 31, 2010 (through January 24, 2011)
     0.05       0.04  

On January 24, 2011, the last sale price of our common stock as reported on the OTCBB was $.05. As of January 24, 2011, there were approximately 210 record owners of our common stock.
 
 
Dividends and Dividend Policy
 
We have never paid dividends on our Common Stock and our present policy is to retain anticipated future earnings for use in our business.
 
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 
None.
 
Securities Authorized for Issuance under Equity Compensation Plans
 
The following table sets forth securities authorized for issuance under any equity compensation plans, none of which has been approved by our stockholders, as of October 31, 2010.
 
Equity Compensation Plan Information
 
   
Number of securities to
  
Weighted-average
  
Number of securities remaining
   
be issued upon exercise
  
exercise price of
  
available for future issuance
   
of outstanding options,
  
of outstanding options,
  
under equity compensation plans
Plan category
  
warrants and rights
  
warrants and rights
  
(excluding securities reflected in column (a))
   
(a)
  
(b)
  
(c)
Equity compensation plans not approved by security holders
  
4,424,000
   $ 0.21  
*
 
*There is no formal equity compensation plan, so there is no specific number of shares available for future issuance. Our authorized, but unissued and unreserved shares of Common Stock total 63,818,244 shares.
 
Recent Sales of Unregistered Securities

In August 2009, we initiated a private placement offering of equity securities to a limited number of accredited investors.  The offering was through the sale of units, with each unit consisting of a warrant to purchase 60,000 shares of our common stock at $0.25 per share.  The offering price per unit was $4,800 with a total of 100 units ($480,000) being offered. We sold nine units in September and October 2009 and received proceeds of $43,200.
 
On September 24, 2009, our Board of Directors authorized the extension of the expiration date of the common stock purchase warrants issued in our 2007 equity private placement. The warrants, exercisable at $1.50 per share, were set to expire on December 31, 2009. The expiration date has now been extended to December 31, 2011. There has been no modification to the exercise price. An aggregate of 3,471,000 warrants have been extended.
 
In January 2010, we issued 150,000 shares of our common stock for consulting services.
 

Effective February 1, 2010, we issued 26,016 shares of our common stock to two non-related individuals for shares owed them from previous private placement offerings.
 
We entered into a consulting agreement on February 5, 2010.  As part of the compensation for services, the consultant was granted a five-year warrant to purchase 300,000 shares of our common stock at the market price per share on the date of issuance, which was $0.09.  The warrant vests 25% on the date of issuance and every three months thereafter and has cashless exercise provisions as defined in the warrant.

The offering and sale of the above securities were deemed to be exempt under Rule 506 of Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended, and were made solely to “accredited investors” as defined in Rule 215 under the Securities Act.
 
Item 6. Selected Financial Data

(Not applicable)
 
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion of our results of operations should be read together with our 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 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 annual report on Form 10-K..
 
Executive Summary
Since 2003, Mobiform’s experience in Microsoft .NET graphics technology has given us a unique perspective and insight into new data visualization possibilities with emerging technologies.

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

Our in-house expertise and experience has provided us the opportunity to partner with companies from various vertical markets, and assist them 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 20 years of experience in software design and development and has designed, built and delivered, over the years, world-class software solutions. In addition to software development, we also derive income from consulting services and contract software development.
 

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

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

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

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

Status falls into the category of a SCADA (Supervisory Control and Data Acquisition) or HMI (Human Machine Interface) software application.
 
Status Vision Designer® is a powerful data visualization software package that allows the user to create highly graphical screens and 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 has built-in connectivity to real-time OPC (Open Process Control) data and can very easily be extended to bind to other types of data. OPC data is primarily used in the manufacturing and process control industries. The market appeal for Status is its ability to connect to a variety of OPC servers and display real-time data from hundreds of data sources.

Consulting
In addition to sales of pre-designed software products, we generate revenue by consulting with organizations which utilize our expertise in customized solutions and embedding our software into theirs. We also offer WPF (Windows Presentation Foundation) and XAML (Extensible Application Markup Language) training and graphic design services.
 
We have been involved in WPF and XAML since it was first released in November 2003 at the Microsoft PDC Conference.  We were one of the earliest adopters of WPF, displaying its first public alpha product related to this technology in January of 2004.
 
We assist consulting clients with their WPF applications.  From initial consulting services and custom development, to embedding our Aurora software into their solution, we have the expertise and personnel to assist. 
 

Licenses and Joint Ventures
We have licensed our technology to other companies for use in their solutions, and we are in initial discussions with additional companies that may want to license or joint venture some of our software applications on an exclusive or nonexclusive basis.
 
In November 2009, we entered into a three year licensing agreement with the industrial controls subsidiary of a $170+ billion multinational corporation (“Licensee 1”) to utilize a portion of our proprietary technology. Licensee 1 has agreed to pay us a per unit royalty, with a minimum of $270,000 per year for the duration of the agreement. In addition we will perform consulting services, on an as needed basis, for which we will be compensated separately based upon services provided.

In November 2009, we entered into a three year non-exclusive licensing agreement with a Fortune 500 company (“Licensee 2”) to utilize a portion of our proprietary software.  Licensee 2 has agreed to pay us $240,000, 50% due upon each invoice dated November 16, 2009 and April 1, 2010 for the three year agreement.  Licensee 2 has the option to extend the agreement in one year increments upon payment of $120,000 per additional year. In addition the licensing agreement provides for us to perform consulting services, on an as needed basis, for which we will be compensated separately based upon services provided.

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

Revenue Strategy
We are currently generating revenues through licensing of our technology to various software companies, retailing portions of our technology as software development components, and in the near future, retailing our software solutions to specific vertical markets. A smaller portion of our revenue will come from consulting services and custom development.
 
We are currently selling our products directly over the Internet from our website and through resellers. In the future, we intend to distribute Aurora through retail outlets and OEMs. We will also target potential customers to offer customized applications to meet their industry requirements.
 
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). The preparation of the financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. Though we evaluate our estimates and assumptions on an ongoing basis, our actual results may differ from these estimates.
 
Certain of our accounting policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s subjective judgments are described below to facilitate a better understanding of our business activities. We base our judgments on our experience and assumptions that we believe are reasonable and applicable under the circumstances.
 
Revenue Recognition - Our revenues are recognized in accordance with FASB ASC Topic 985-605 “Revenue Recognition” for the software industry.  Revenue from the sale of software licenses is recognized when standardized software modules are delivered to and accepted by the customer, the license term has begun, the fee is fixed or determinable and collectibility is probable.  Revenue from software maintenance contracts and Application Service Provider (“ASP”) services are recognized ratably over the lives of the contracts.  Revenue from professional services is recognized when the service is provided.
 

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

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

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

Results of Operations
 
The following table sets forth, for the periods indicated, certain items from the consolidated statements of operations. Comparative analysis of ratios of costs and expenses to revenues is not shown in the following narrative discussion as management believes such ratios to be uninformative due to the insignificant level of revenue in fiscal 2009.
 
 
For The Years Ended
October 31,
  
   
2010
    
2009
  
Revenues
   $ 824,508     $ 86,510  
                 
Operating expenses:
                
  Compensation costs
     594,267       658,804  
  Consulting fees
     124,656       341,474  
  Advertising
     34,436       41,295  
  Professional fees
     137,719       224,585  
                 
Interest and debt costs
     12,000       4,625  
Derecognition of common share liability
     -       (400,000 )
Income tax provision ( benefit)
     -       -  
                 
Net loss
   $ (192,470 )   $ (929,694 )
Net loss per share – basic and diluted
   $ (0.01 )   $ (0.04 )
 
 
Comparison of the Fiscal Years Ended October 31, 2010 and 2009
 
Revenues
 
Our revenues for the year ended October 31, 2010 amounted to $824,508 compared to the comparative 2009 period of $86,510. Revenues for the year increased by approximately $738,000 primarily resulting from new licensing agreements entered into in November 2009. Revenues from these agreements amounted to $696,000 of which $292,000 represents licensing fees and $404,000 relates to consulting, maintenance and support. The balance of the increase is primarily related to sales of our software and other service revenues. Service revenues include revenues from fees charged for the implementation of our software products and training of customers in the use of such products. We are currently selling our software over the internet and are marketing our products and services to companies which may want to license or joint venture some of our software applications.
 
Operating Expenses
 
Our operating expenses consist primarily of compensation costs, advertising and professional services.
 
Compensation costs consist of payroll and share based compensation, primarily through the issuance of warrants, to employees. Payroll and share based compensation amounted to $594,267 and $0, respectively, in the year ended October 31, 2010 compared to $595,468 and $63,336, respectively, in the year ended October 31, 2009. We continue to manage our payroll costs as we implement our strategic plan. Share based compensation costs decreased $63,336 (100%) as we now issue warrants to employees on a more selective basis, determined by their qualifications and performance.
 
Advertising costs have decreased to $34,436 in the year ended October 31, 2010 from $41,295 in the year ended October 31, 2009, a decrease of $6,859 (17%). We reduced our advertising budget temporarily as a means of preserving capital as we implement our plan for revenue growth.

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

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

Other Income (Expenses)
 
Other income decreased from $374,047 in the year ended October 31, 2009 to an expense of $12,000 in the year ended October 31, 2010 primarily due to $400,000 of gain from the derecognition of common share liability in fiscal 2009. We entered into a consulting agreement on January 31, 2007 that either party could cancel upon 10 days notice. As part of the compensation for services, the consultant was to receive an aggregate of 750,000 shares of the Company’s common stock. The consultant earned and was issued 350,000 shares. The issuance of the remaining 400,000 common shares was contingent upon certain actions by us. Since it was our intent that such actions would be fulfilled, we charged operations in 2007 and 2008 for the value of such common shares and had an accrued common share liability at October 31, 2008 of $400,000 for the fair value of the 400,000 shares. During the first quarter of fiscal 2009 we mutually agreed with the consultant to cancel the obligation to issue the 400,000 common shares. As a result, we reduced the accrued common share liability and recorded a gain from the derecognition of common share liability for $400,000 in the first quarter of fiscal 2009.
 
Income Taxes
 
The expected tax benefits resulting from pre-tax losses have been fully reserved as we are not presently able to determine if it is more likely than not that we will be able to realize the tax benefits in the future.

Net Loss
 
 Net loss in the year ended October 31, 2010 totaled $192,470 compared to $929,694 in the year ended October 31, 2009, a decrease of $737,224 (79%).
 
Comparison of the Fiscal Years Ended October 31, 2009 and 2008
 
Revenues
 
Our revenues for the years ended October 31, 2009 and 2008, of $86,510 and $81,770, respectively, remain primarily from services.  Service revenues include revenues from fees charged for the implementation of our software products and training of customers in the use of such products. Revenues for the year increased by approximately $5,000 or 6%. We are currently selling our software over the internet and are in initial discussions with companies which may want to license or joint venture some of our software applications. Subsequent to year end we signed contracts with two of these companies, as described above.
 
Operating Expenses
 
Our operating expenses consist primarily of compensation costs, advertising and professional services.
 
 
Compensation costs consist of payroll and share based compensation, primarily through the issuance of warrants, to employees. Payroll and share based compensation amounted to $595,468 and $63,336, respectively, in the year ended October 31, 2009 compared to $757,399 and $623,320, respectively, in the year ended October 31, 2008. Payroll decreased $161,931 (22%) as we decreased the number of employees from 11 to 8. We continue to try to preserve capital as we implement our strategic plan to generate revenues. Share based compensation costs decreased $559,984 (90%) as we now issue warrants to employees on a more selective basis, determined by their qualifications and performance.
 
Advertising costs have decreased to $41,295 in the year ended October 31, 2009 from $265,625 in the year ended October 31, 2008, a decrease of $224,330 (85%). In 2008 and throughout fiscal 2009 we decreased the marketing of our products and services in trade publications and at trade shows.
 
Professional fees decreased from $407,910 in the year ended October 31, 2008 to $224,585 in the year ended October 31, 2009. The decrease of $183,325 (45%) is primarily a result of investment banking, accounting, audit and legal fees incurred in preparation of our filing as a registered public company. We expect these fees to decrease again in fiscal 2010, but not as significantly as the percentage decline from fiscal 2008 to fiscal 2009. Consulting fees in fiscal 2009 of $57,300 increased by $23,705 from the fiscal 2008 amounts of $33,595 primarily from contracts entered into in the latter part of 2009 for investment advisory services. We also incurred $284,174 in share based consulting fees in fiscal 2009, an increase of $217,507 (327%) from the $66,667 incurred in fiscal 2008. We utilized equity-based payments for consulting fees, when possible, in fiscal 2009 as a means of preserving working capital for other operating costs.
 
Interest and Debt Costs
 
Interest expense, the amortization of the convertible debentures’ debt discount and deferred financing costs decreased from $22,882 in fiscal 2008 to $4,625 in fiscal 2009. The decrease of $18,257 was primarily due to the debt discount ($8,534 decrease) and deferred financing costs ($5,258 decrease) becoming fully amortized in the first quarter of fiscal 2008. Interest expense decreased from $9,090 to $4,625 since $225,000 of the convertible debentures were converted into shares of our common stock in the last quarter of fiscal 2007, $100,000 was paid back in cash in the second quarter of fiscal 2008 and $25,000 was converted into shares of common stock in the first quarter of fiscal 2009. The remaining $50,000 in convertible debentures is outstanding as of October 31, 2009.
 
Other Income (Expenses)
 
Other income increased to $374,047 in the year ended October 31, 2009 from $17,361 in the year ended October 31, 2008 primarily due to $400,000 of gain from the derecognition of common share liability in fiscal 2009. We entered into a consulting agreement on January 31, 2007 that either party could cancel upon 10 days notice. As part of the compensation for services, the consultant was to receive an aggregate of 750,000 shares of the Company’s common stock. The consultant earned and was issued 350,000 shares. The issuance of the remaining 400,000 common shares was contingent upon certain actions by us. Since it was our intent that such actions would be fulfilled, we charged operations in 2007 and 2008 for the value of such common shares and had an accrued common share liability at October 31, 2008 of $400,000 for the fair value of the 400,000 shares. During the first quarter of fiscal 2009 we mutually agreed with the consultant to cancel the obligation to issue the 400,000 common shares. As a result, we reduced the accrued common share liability and recorded a gain from the derecognition of common share liability for $400,000 in the first quarter of fiscal 2009. In addition, interest income decreased from $50,392 in fiscal 2008 to $6,035 in fiscal 2009 as we utilized invested cash to fund operations.
 
 
Income Taxes
 
The expected tax benefits of $320,000 (2009) and $750,000 (2008) resulting from pre-tax losses of $929,694 in fiscal 2009 and $2,205,411 in fiscal 2008 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. The tax benefit of $10,960 in fiscal 2007 resulted in a change in the estimated Canadian tax credit refund applied for in prior years.
 
Net Loss
 
Net loss in the year ended October 31, 2009 totaled $929,694 compared to $2,205,411 in the year ended October 31, 2008, a decrease of $1,275,717 (58%).
 
Liquidity and Capital Resources
 
We continue to fund our operations through private placement offering and financings.
 
In August 2009, we initiated a private placement offering of equity securities to a limited number of accredited investors.  The offering is through the sale of units, with each unit consisting of a warrant to purchase 60,000 shares of our common stock at $0.25 per share.  The offering price per unit is $4,800 with a total of 100 units ($480,000) being offered. We sold 9 units in September and October 2009 and received proceeds of $43,200.

On October 16, 2009, we executed a promissory note in the amount of $50,000 with our Chief Executive Officer (“CEO”). The note, which is due on demand, accrues interest at 8% per annum. On November 10, 2009, we executed a promissory note in the amount of $50,000 payable to our CEO.  The note, which is due on demand, accrues interest at 8% per annum.  The proceeds are being used for working capital purposes.

At October 31, 2010 we had cash and cash equivalents of $68,000 compared to $15,000 at October 31, 2009. The increase of $53,000 is primarily attributable to the cash received from payments on our new licensing agreements and funds borrowed from our CEO, net of our operating costs.

Cash Flows
 
Net cash provided by (used for) operating activities amounted to $13,000 and ($943,000) in the fiscal years ended October 31, 2010 and 2009, respectively. Net cash from operations increased as a result of additional cash generated from our licensing agreements while we managed to reduce operating costs as discussed above.

In fiscal 2010, we generated cash from financing activities of $50,000. This represented our promissory note with our CEO in the amount of $50,000. We generated cash from financing activities of $93,200 in fiscal 2009. This represented $43,200 from the sale of units in our August 2009 private placement offering and our promissory note with our CEO in the amount of $50,000.
 

In fiscal 2010, cash used for investing activities related to the acquisition of equipment in the amount of $10,559. In fiscal 2009, investing activities provided cash as we redeemed $583,000 of our certificate of deposits and we received $85,000 from the sale of property, both of which were used for working capital.
 
We do not believe that our cash on hand at October 31, 2010 will be sufficient to fund our operations for at least the next 12 months. We have signed significant licensing agreements in the first quarter of fiscal 2010 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. We may need to raise additional capital through debt and/or equity financings, however, there is no assurance that we will be able to obtain additional capital in the amount or on terms acceptable to us at the required time.
 
Contractual Obligations
 
N/A
 
Off-Balance Sheet Arrangements
 
As of October 31, 2010, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.
 
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
 
Interest Rate Risk
 
N/A

Recent Accounting Pronouncements
 
In January 2010, the Financial Accounting Standards Board ("FASB") issued, and the Company adopted, Accounting Standards Codification (“ASC”) Update No. 2010-05 “Escrowed Share Arrangements and the Presumption of Compensation” (“ASCU No. 2010-05”). ASCU No. 2010-05 codifies the SEC staff’s views on escrowed share arrangements which historically has been that the release of such shares to certain shareholders based on performance criteria is presumed to be compensatory. When evaluating whether the presumption of compensation has been overcome, the substance of the arrangement should be considered, including whether the transaction was entered into for a reason unrelated to employment, such as to facilitate a financing transaction. In general, in financing transactions the escrowed shares should be reflected as a discount in the allocation of proceeds. In debt financings the discounts are to be amortized using the effective interest method, while discounts on equity financings are not generally amortized. As it relates to future financings, the adoption of this update may have an effect on the Company’s financial statements.
 

In January 2010, the FASB issued ASC Update No. 2010-06 “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements” which updated guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. This update requires new disclosures on significant transfers of assets and liabilities between Level 1 and Level 2 of the fair value hierarchy (including the reasons for these transfers) and the reasons for any transfers in or out of Level 3. This update also requires a reconciliation of recurring Level 3 measurements about purchases, sales, issuances and settlements on a gross basis. In addition to these new disclosure requirements, this update clarifies certain existing disclosure requirements. For example, this update clarifies that reporting entities are required to provide fair value measurement disclosures for each class of assets and liabilities rather than each major category of assets and liabilities. This update also clarifies the requirement for entities to disclose information about both the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements. This update will become effective for the Company with the interim and annual reporting period beginning November 1, 2010, except for the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will become effective for the Company with the interim and annual reporting period beginning November 1, 2011. The Company will not be required to provide the amended disclosures for any previous periods presented for comparative purposes. Other than requiring additional disclosures, adoption of this update will not have a material effect on the Company's 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 8. Financial Statements and Supplementary Data
 
Our financial statements are contained in the pages beginning  F-1, which appear at the end of this annual report.
 
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
 
As reported in our 8-K report filed with the SEC on September 10, 2008, on September 8, 2008, pursuant to our Board of Directors’ resolution, we dismissed Raich Ende Malter & Co. LLP, (“REM”), as our independent registered public accounting firm.

Concurrent with this action, our Board of Directors appointed Meyler & Company, LLC. (“Meyler”), as our new independent certified public accounting firm. Meyler is located at One Arin Park, 1715 Highway 35, Middletown, NJ 07748.
 
Our consolidated financial statements for the years ended October 31, 2007 and 2006 were audited by REM. REM’s reports on our financial statements for those two fiscal years, respectively, did not contain an adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.
 
During the years ended October 31, 2007 and 2006 and through September 8, 2008, there were no disagreements with REM on any matter of accounting principles or practices, financial statement disclosure, auditing scope or procedure, which disagreements, if not resolved to the satisfaction of REM, would have caused it to make reference to the subject matter of the disagreement in connection with its report.
 
The Company has provided REM with a copy of the Form 8-K referred to above prior to its filing with the SEC and requested them to furnish a letter addressed to the SEC stating whether it agrees with the statements made above. Attached as Exhibit 16.1 to that 8-K report is a copy of REM’s letter to the SEC, dated September 10, 2008, confirming no disagreement.
 
During the period the Company engaged REM, neither the Company nor anyone on the Company's behalf consulted with Meyler regarding either (i) the application of accounting principles to a specified transaction, either contemplated or proposed, or the type of audit opinion that might be rendered on the Company's financial statements or (ii) any matter that was either the subject of a disagreement or a reportable event.
 
 
The Company has authorized REM to respond fully to all inquiries of Meyler.

Item 9A(T).  Controls and Procedures
 
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in company reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our chief executive officer and treasurer, as appropriate to allow timely decisions regarding required disclosure.
 
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our chief executive officer and chief financial officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of October 31, 2010. Based on his evaluation, he concluded that our disclosure controls and procedures were effective.
 
Management is responsible for establishing and maintaining adequate internal control over our financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Our internal control over financial reporting is a process designed by, or under the supervision of, our chief executive officer and chief financial officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of our board of directors and management; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Under the supervision and with the participation of our management, including our chief executive officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this evaluation under the criteria established in Internal Control – Integrated Framework, our management concluded that our internal control over financial reporting was effective as of October 31, 2010.
 
During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting.
 
Item 9B. Other Information
 
None.
 
 
PART III
 
Item 10. Directors, Executive Officers and Corporate Governance
 
Management
 
The Company’s management and key employee is the following:
 
Name   Age   Position with Company
Allen Ronald DeSerranno   44   CEO, President, CFO, Director
 
The profile of our officer and director is set forth below:
 
Ron DeSerranno
 
Mr. DeSerranno is a founder and CEO of Mobiform Canada, which was organized in March, 2003. Since Mobiform’s October, 2005 acquisition of Mobiform Canada, he has been Chief Executive Officer, President and a Director of Mobiform. His software development career first began at the Space and Atmospheric Research Group, Physics Department, at the University of Western Ontario. He was a Microsoft Certified Trainer and Consultant and taught courses in both New York and Toronto. From August, 1997 to November, 2000, he was a Senior Software Engineer for Rockwell Software, Inc./Dynapro Inc. where he was the development lead and architect for Rockwell’s flagship industrial automation product RSView, an invaluable tool to globally scaled companies like Kraft and General Motors. In 2002 he served as Vice President of Software Development for Motivus Software Ltd. which was acquired by Citrex Corp. Other ventures include the establishment of BoardMaster Software.  Mr. DeSerranno is considered one of the leading authorities on XAML based graphics technologies and has been designing and developing world class software products for many years. Mr. DeSerranno received diplomas in Environmental Technology and Computer Support Technician in 1991 from Fanshawe College of Applied Arts and Technology and a degree in Physical Geography in 1993 from the University of Western Ontario and attended, in 1994, CDI College for Program Analysis. He is not a director of any other reporting company.
 
Our Director and executive officer has not been involved in legal proceedings in the last five years.
 
Indemnification of Directors and Officers
 
Our Certificate of Incorporation provides that the Company shall, to the fullest extent permitted by the law of the State of Delaware, indemnify any and all persons whom it shall have power to indemnify from and against any and all of the expenses, liabilities or other matters referred to in or covered by the applicable provisions of Delaware law, and the indemnification provided for will not be deemed exclusive of any other rights to which those indemnified may be entitled under any By-Law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in their official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. We are required to indemnify each officer and director to the fullest extent permitted by law and to advance certain expenses incurred by such persons. Our Certificate of Incorporation and Delaware law provide limitations on the directors’ rights to indemnification in certain circumstances.
 
 
Code of Business Conduct and Ethics
 
We have adopted a Code of Business Conduct and Ethics, which is attached as an exhibit to this report.
 
 
The following table sets forth, for the fiscal years ended October 31, 2009 and October 31, 2010, all compensation paid, distributed or accrued, including salary and bonus amounts, for services rendered to us by our Principal Executive Officer, during the fiscal years ended October 31, 2009 and October 31, 2010. No other executive officer who was serving as an executive officer at October 31, 2010, had total compensation for fiscal 2010 exceeding $100,000:
 
Year Ended
                      
Name and Principal Position
  
October 31
  
Salary ($)
    
Option Awards(1)/
    
Total
  
Allen Ronald DeSerranno
  
2009
     150,000       0     $ 150,000  
Chief Executive Officer
  
2010
     150,000       0     $ 150,000  
 
(1) On April 1, 2006 the Company issued 2,000,000 five year warrants, exercisable at $.20, to Mr. DeSerranno. They vested 25% each six months through March 31, 2008. On April 1, 2007 the Company issued 3,500,000 five year warrants, exercisable at $.75, to Mr. DeSerranno. These vested 25% each six months from September 30, 2007 to March 31, 2009. On June 10, 2009 Mr. DeSerranno surrendered all 3,500,000 of the $.75 warrants and they were canceled.  The value of the options compensation was determined using the Black-Scholes model.
 
The following table sets forth certain information regarding the options held and value of each such officer’s unexercised options as of October 31, 2010.
 
Outstanding Equity Awards at Fiscal Year-End
 
                   
Number of
                   
Securities
   
Number of Securities
          
Underlying
    Underlying Unexercised  
Warrant
  
Warrant
  
Unexercised
   
Warrants
  
Exercise
  
Expiration
  
Unearned
   
Exercisable
  
Unexercisable
  
Price ($)
  
Date
  
Warrants
Allen Ronald DeSerranno(1)
     2,000,000       $  .20   3/31/2011    
Chief Executive Officer
                        
 
(1) On April 1, 2006 the Company issued 2,000,000 five year warrants, exercisable at $.20, to Mr. DeSerranno. They vested 25% each six months through March 31, 2008. On April 1, 2007 the Company issued 3,500,000 five year warrants, exercisable at $.75, to Mr. DeSerranno. These vested 25% each six months from September 30, 2007 to March 31, 2009.  On June 10, 2009 Mr. DeSerranno surrendered all 3,500,000 of the $.75 warrants and they were canceled.
 
 
Director Compensation
 
We do not compensate our directors for serving on our Board of Directors, other than any compensation which a director may earn as an employee of the Company. We reimburse our directors for any travel related expenses incurred in performing their duties as directors.
 
Employment Agreements with Executive Management and Directors
 
Mr. DeSerranno had an employment agreement with the Company, which provided for an annual salary of $150,000, which expired on March 31, 2009.  Effective April 1, 2009 Mr. DeSerranno’s salary has continued at the same rate and will remain in effect until a new agreement is executed.
 
Pursuant to his previous employment agreement on April 1, 2006 Mr. DeSerranno received a five-year warrant to purchase 2,000,000 shares of Common Stock exercisable at $0.20 per share on a cashless basis and pursuant to the amendments to his employment agreement effective April 1, 2007, Mr. DeSerranno received a five-year warrant to purchase 3,500,000 shares exercisable at $0.75 per share on a cashless basis. The warrants vested over a two-year period beginning on the date of the respective agreements at the rate of 25% every six months.  On June 10, 2009 Mr. DeSerranno surrendered all 3,500,000 of the $.75 warrants and they were canceled.
 
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 
The following table sets forth the number of shares of Common Stock beneficially owned as of January 24, 2011 by (i) those persons or groups known to us who beneficially own more than 5% of our Common Stock; (ii) each director; (iii) each executive officer whose compensation exceeded $100,000 in the fiscal year ended October 31, 2010; and, (iv) all directors and executive officers as a group. Beneficial ownership is determined in accordance with Rule 13d-3 under the Exchange Act based upon information furnished by persons listed or contained in filings made by them with the SEC and by information provided by such persons directly to us. Except as indicated, the stockholders listed below possess sole voting and investment power with respect to their shares.

   
Number of
        
   
Shares of
    
Percentage of
  
   
Common Stock
    
Outstanding
  
   
Beneficially
    
Shares of
  
Name(1)
  
Owned(2)
    
Common Stock(3)
  
Allen Ronald DeSerranno(4)
     11,404,955       43.18 %
Francis V. Lorenzo(5)
     2,160,000       8.18 %
Gary Fuhr(6)
     1,561,085       6.33 %
All officers and directors as a group
                
(One person)(5)
     11,404,955       43.18 %
 
 
(1) The address of Mr. DeSerranno is c/o Mobiform Software, Inc., 1255 N Vantage Pt. Dr., Suite A, Crystal River, Florida 34429. Mr. Lorenzo, a former officer and director of the Company, has an address at 7129 Cenrose Circle, Westwood, NJ 07675.  Mr. Fuhr, a former employee of the Company, has an address at 7204 Stride Avenue, Burnaby, BC V3N 1T9 Canada.
 
(2) Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of Common Stock relating to options currently exercisable or exercisable within 60 days of the date of this table, are deemed outstanding for computing the percentage of the person holding such securities, but are not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them.
 
(3) Based upon 24,586,672 shares of Common Stock outstanding plus in each case the shares which the person or group has a right to acquire within 60 days through the exercise of warrants.
 
(4) Includes 2,000,000 shares of Common Stock issuable upon the exercise of warrants and 1,721,979 held by a corporation wholly-owned by Mr. DeSerranno. Excludes 316,373 shares of Common Stock held by Mr. DeSerranno’s wife, Rita Honurata DeSerranno, as to which he disclaims beneficial ownership.
 
(5) Includes 2,000,000 shares of Common Stock issuable upon the exercise of warrants.
 
(6) Includes 250,000 shares of Common Stock issuable upon the exercise of warrants.

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

Item 13. Certain Relationships and Related Transactions, and Director Independence
 
Since the beginning of the last fiscal year we have had no reportable transactions with related parties and none is currently proposed.
 

Item 14. Principal Accountant Fees and Services
 
Meyler & Company, LLC served as our independent registered public accounting firm for the fiscal years ended October 31, 2010 and 2009.    The following table shows the fees that were billed for the audit and other services provided by such firm for 2010 and 2009.

 
  
2010
    
2009
  
 Meyler & Company, LLC:
            
Audit Fees
   $ 55,000   $
68,000
  
Audit-Related Fees
     0       0  
Tax Fees
     0       0  
All Other Fees
     0       0  
Total
   $ 55,000     $ 68,000  
 
Audit Fees — This category includes the audit of our annual financial statements, review of financial statements included in our Form 10-Q Quarterly Reports and services that are normally provided by the independent auditors in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.
 
Audit-Related Fees — This category consists of assurance and related services by the independent auditors that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the SEC and other accounting consulting.
 
Tax Fees — This category consists of professional services rendered by our independent auditors for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.
 
All Other Fees — This category consists of fees for other miscellaneous items.
 
Our Board of Directors acting as our Audit Committee preapproved the engagement of each of our independent registered public accounting firms.
 
 
PART IV
 
Item 15. Exhibits, Financial Statement Schedules
 
Number
Description
   
3.1
 Certificate of Incorporation *
   
3.2
 By-laws *
   
4.1
 Form of Specimen Stock Certificate *
   
10.3
 Form of Warrant — $1.50 *
   
10.3.1
 Form of Warrant — $.75 *
   
10.3.2
 Form of Warrant — $.20 *
   
10.4
 Employment Agreement dated April 1, 2006 with Allen Ronald DeSerranno *
   
10.5
 Employment Agreement dated April 1, 2006 with Francis V. Lorenzo *
   
10.6
 Assignment and Amendment of Employment Agreement — Allen Ronald DeSerranno*
   
10.7
 Assignment and Amendment of Employment Agreement — Francis V. Lorenzo*
   
10.8
 Termination Agreement — Francis V. Lorenzo*
   
10.9
 Form of 8% Convertible Note*
   
10.10
Exchange Agreement dated August 31, 2005*
   
14.1
 Code of Ethics***
   
16.1
 Letter dated September 10, 2008 from Raich Ende Malter & Co. LLP, to the Securities and Exchange Commission**
   
19
   
23.1
 Consent of Meyler & Company, LLC, independent registered public accounting firm**
   
23.2
 Consent of Raich Ende Malter & Co. LLP, independent registered public accounting firm**
   
31.1
   
32.1
 
*  Incorporated by reference to the correspondingly numbered exhibit to the Company's Registration Statement on Form S-1 filed on April 9, 2008.
**  Incorporated by reference to the correspondingly numbered exhibit to the Company's Report on Form 8-k filed on September 10, 2008.
***  Incorporated by reference to the correspondingly numbered exhibit to the Company's Report on Form 10-K   filed on January 29, 2010.
****Filed herewith.
*****Furnished herewith pursuant to Regulation FD.
 


SIGNATURES
 
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Crystal River, Florida on January 31 , 2011.

 
MOBIFORM SOFTWARE, INC.
  
       
 
By:
/s/Allen Ronald DeSerranno                          
   
Allen Ronald DeSerranno
  
   
Chief Executive Officer
  
   
and Chief Financial Officer
  

Pursuant to the requirements of the Securities Act of 1933, this report  has been signed by the following persons in the capacities and on the dates indicated:
 
 Name   Title    Date
/s/ Allen Ronald DeSerranno                           Chief Executive Officer, Chief Financial Officer and  Director   January 31, 2011
Allen Ronald DeSerranno   (Principal Executive, Financial and Accounting Officer)    
 

Financial Statements
 
Index to Financial Statements
 
 
Meyler&Company LLC One Arin Park   Phone: 732-671-2244
Certified Public Accountants  1715 Highway 35  
& Management Consultants   Middletown, NJ 07748  

 

 
Report of Independent Registered Public Accounting Firm


To the Board of Directors of
Mobiform Software, Inc.
Crystal River, Florida

We have audited the accompanying consolidated balance sheets of Mobiform Software, Inc. as of October 31, 2010 and 2009, and the related consolidated statements of operations, stockholders' deficiency and cash flows for each of the years in the two-year period ended October 31, 2010.  Mobiform Software, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mobiform Software, Inc. as of October 31, 2010 and 2009, and the results of its operations and its cash flows for each of the years in the two-year period ended October 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.  As discussed in Note 2 to the consolidated financial statements, since inception the Company has incurred losses including a net loss of $192,470 for the year ended October 31, 2010, has an accumulated deficit of $7,367,781 at October 31, 2010, has experienced negative cash flows from operations, and there are existing uncertain conditions which the Company faces relative to its obtaining financing and capital in the equity markets.  These conditions raise substantial doubt about its ability to continue as a going concern.  Management’s plans regarding these matters are also described in Note 2.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.


/s/ Meyler & Company, LLC


January 31, 2011
Middletown, NJ

 

MOBIFORM SOFTWARE, INC.

CONSOLIDATED BALANCE SHEETS

   
October 31,
  
   
2010
    
2009
  
Assets
            
Current Assets
            
Cash and Cash Equivalents
   $ 67,980     $ 14,966  
Accounts Receivable – Net
     73,290       9,920  
Prepaid Expenses and Other Current Assets
     8,093       47,801  
Total Current Assets
     149,363       72,687  
                 
Property and Equipment – Net
     29,405       32,768  
                 
Other Assets
                
Security Deposits
     3,650       3,650  
                 
Total Assets
   $ 182,418     $ 109,105  
                 
Liabilities and Stockholders’ Deficiency
                
Current Liabilities
                
Convertible Notes Payable
   $ 50,000     $ 50,000  
Notes Payable – Related Party
     100,000       50,000  
Accounts Payable and Accrued Liabilities
     130,067       110,479  
Deferred Revenue
     168,404       5,833  
Common Share Liability
     -       29,250  
Total Current Liabilities
     448,471       245,562  
                 
Commitments and Contingencies
      -        -  
                 
Stockholders’ Deficiency
                
Preferred Stock, $0.0001 Par Value, 5,000,000 Shares
      -        -  
Authorized and Unissued
                
Common Stock, $0.0001 Par Value; 100,000,000 Shares
                
       Authorized; Shares Issued and Outstanding, 24,586,672 at
                
October 31, 2010 and 24,410,656 at October 31, 2009
     2,459       2,441  
Additional Paid in Capital
     7,099,269       7,036,413  
Accumulated Deficit
     (7,367,781 )     (7,175,311 )
Total Stockholders’ Deficiency
     (266,053 )     (136,457 )
                 
Total Liabilities and Stockholders’ Deficiency
   $ 182,418     $ 109,105  

See accompanying notes to consolidated financial statements.
 
 
MOBIFORM SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

   
For the Years Ended
  
   
October 31,
  
   
2010
    
2009
  
             
Revenue
   $ 824,508     $ 86,510  
                 
Operating Expenses
                
Payroll Expenses
     594,267       595,468  
Compensation – Share Based
     -       63,336  
Consulting Fees – Share Based
     73,200       284,174  
Professional Fees
     137,719       224,585  
Advertising
     34,436       41,295  
Depreciation and Amortization
     13,922       19,288  
Consulting Fees
     51,456       57,300  
Office
     13,244       15,450  
Rent
     29,689       40,606  
Telephone and Communication
     12,279       11,565  
Other
     44,766       37,184  
Total Operating Expenses
     1,004,978       1,390,251  
                 
Operating Loss
     (180,470 )     (1,303,741 )
                 
Other Income (Expenses)
                
Interest Income
     -       6,035  
Interest Expense
     (4,000 )     (4,461 )
Interest Expense-Related Party
     (8,000 )     (164 )
Loss on Sale of Asset
     -       (27,363 )
    Gain from Derecognition of Common Share Liability
     -       400,000  
Total Other Income (Expenses)
     (12,000 )     374,047  
                 
Loss Before Income Taxes
     (192,470 )     (929,694 )
                 
Provision for Income Taxes
     -       -  
                 
Net Loss
   $ (192,470 )   $ (929,694 )
                 
Net Loss Per Common Share – Basic and Diluted
   $ (0.01 )   $ (0.04 )
                 
Weighted-Average Common Shares Outstanding – Basic and Diluted
     24,543,057       23,861,668  
 
See accompanying notes to consolidated financial statements.
 
 
MOBIFORM SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY

               
Additional
              
   
Common Stock
    
Paid
    
Accumulated
        
   
Shares
    
Amount
    
Capital
    
Deficit
    
Total
  
                               
Balance – November 1, 2008
     23,652,125     $ 2,365     $ 6,606,891     $ (6,245,617 )   $ 363,639  
                                         
Stock based compensation
     -       -       63,336       -       63,336  
                                         
Issuance of common stock upon the
                                        
conversion of debt and accrued interest
     58,124       6       29,056       -       29,062  
                                         
Issuance of common stock for services per
                                        
consulting contracts
     500,000       50       215,950       -       216,000  
                                         
Issuance of common stock for compensation
                                        
per employment agreement
     200,000       20       77,980       -       78,000  
                                         
Issuance of warrants for cash
     -       -       43,200       -       43,200  
                                         
Issuance of common stock for
                                        
correction of merger shares
     407       -       -       -       -  
                                         
Net loss for the year ended
                                        
October 31, 2009
     -       -       -       (929,694 )     (929,694 )
                                         
Balance – October 31, 2009
     24,410,656       2,441       7,036,413       (7,175,311 )     (136,457 )
                                         
Issuance of common stock for services per
                                        
consulting contracts
     150,000       15       58,485       -       58,500  
                                         
Issuance of common stock from previous
                                        
private placement offerings
     26,016       3       (3 )     -       -  
                                         
Issuance of warrants for consulting
                                        
services
     -       -       4,374       -       4,374  
                                         
Net loss for the year ended
                                        
October 31, 2010
     -       -       -       (192,470 )     (192,470 )
                                         
Balance – October 31, 2010
     24,586,672     $ 2,459     $ 7,099,269     $ (7,367,781 )   $ (266,053 )

See accompanying notes to consolidated financial statements.
 
 
MOBIFORM SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

   
For the Years Ended
  
   
October 31,
  
   
2010
    
2009
  
Operating Activities
            
Net Loss
   $ (192,470 )   $ (929,694 )
Adjustments to Reconcile Net Loss to Net Cash
                
 Provided by (Used For) Operating Activities:
                
Depreciation and Amortization
     13,922       19,288  
Consulting Fees – Share Based
     73,200       284,174  
Deferred Revenue
     162,571       -  
Compensation – Share Based
     -       63,336  
Gain from Derecognition of Common Share Liability
     -       (400,000 )
Loss on Sale of Asset
     -       27,363  
                 
Changes in Assets and Liabilities:
                
(Increase) Decrease in:
                
Accounts Receivable
     (63,370 )     20,460  
Prepaid Expenses and Other Current Assets
     131       (2,920 )
Increase (Decrease) in:
                
Accounts Payable and Accrued Liabilities
     19,589       (25,155 )
Net Cash Provided by (Used for) Operating Activities
     13,573       (943,148 )
                 
Investing Activities
                
Acquisition of Equipment
     (10,559 )     -  
Redemption of Certificate of Deposit
     -       583,283  
Proceeds from Sale of Asset
     -       85,119  
Net Cash (Used for) Provided by Investing Activities
     (10,559 )     668,402  
                 
Financing Activities
                
Proceeds from notes payable – related party
     50,000       50,000  
Proceeds from sale of warrants
     -       43,200  
Net Cash Provided by Financing Activities
     50,000       93,200  
                 
Change in Cash and Cash Equivalents
     53,014       (181,546 )
                 
Cash and Cash Equivalents – Beginning of Year
     14,966       196,512  
                 
Cash and Cash Equivalents – End of Year
   $ 67,980     $ 14,966  
                 
Supplemental Disclosures of Cash Flow Information
                
Cash paid during the year for:
                
Interest
   $ -     $ -  
Income Taxes
   $ -     $ -  
                 
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
                
Debt and Accrued Interest Converted into Common Stock
   $ -     $ 29,062  
Common Stock Issued for Prepaid Consulting Expense
   $ 58,500     $ 216,000  

See accompanying notes to consolidated financial statements.
 
 
MOBIFORM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2010
 
 
(1)           Nature of Business and Basis of Presentation
 
Mobiform Software, Inc, (“Mobiform 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.  The closing date of the exchange agreement was October 27, 2005. However, for accounting purposes the transaction is treated as being effective October 31, 2005. In connection with the agreement, Mobiform US issued 14,299,593 shares of common stock to the shareholders of Mobiform Canada in exchange for 100% of the outstanding shares of Mobiform Canada. As a result, Mobiform Canada became a 100% owned subsidiary of Mobiform US with the former shareholders of Mobiform Canada owning approximately 89% of the then outstanding shares of Mobiform US. For accounting purposes, the transaction is being recorded as a recapitalization with the shareholders of Mobiform Canada as the acquirers. The 14,299,593 shares of common stock issued in the transaction are shown as outstanding for all periods presented in the same manner as a stock split. The accompanying financial statements reflect the consolidated operations of the company from November 1, 2005. Effective September 14, 2010, Mobiform Canada was dissolved.
 
Mobiform US (“Mobiform,” the “Company,” “we” or “us”) is in the business of developing graphics authoring products that enable software developers and designers to visually build documents and have them automatically converted into XAML (Extensible Application Markup Language) the new language in Microsoft Windows Vista. We license and maintain these software products throughout the United States, Canada, Europe and Asia.

 
(2)           Going Concern
 
The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  We have incurred substantial net operating losses and used substantial amounts of cash in our operating activities.  Since our inception, we have incurred losses, have an accumulated deficit of $7,367,781 at October 31, 2010, and have experienced negative cash flows from operations.  The expansion and development of our business will likely require additional capital.  This condition raises substantial doubt about our ability to continue as a going concern.  The accompanying consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.

We are presently working to raise additional capital to meet our working capital needs and are restructuring operating costs as we continue to market our products in line with our business plan. During the year ended October 31, 2010, we have signed significant licensing agreements and continue to implement our strategic business plan. There are no assurances, however, that we will be successful in our efforts to raise capital or generate sufficient revenues through our marketing efforts or to reduce operating costs to a level where we will attain profitability.
 
 
MOBIFORM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2010


(3)  
Summary of Significant Accounting Policies

Principles of Consolidation - The financial statements include the accounts of Mobiform Software, Inc. and its wholly-owned Canadian subsidiary, Mobiform Software, Ltd. All material intercompany balances and transactions have been eliminated in consolidation.

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.

Accounting Standards Codification -The Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC) became effective on July 1, 2009. At that date, the ASC became FASB’s officially recognized source of authoritative U.S. generally accepted accounting principles (GAAP) applicable to all public and non-public non-governmental entities, superseding existing FASB, American Institute of Certified Public Accountants (AICPA), Emerging Issues Task Force (EITF) and related literature. Rules and interpretive releases of the SEC under the authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. All other accounting literature is considered non-authoritative. The switch to the ASC affects the way companies refer to U.S. GAAP in financial statements and accounting policies. Citing particular content in the ASC involves specifying the unique numeric path to the content through the Topic, Subtopic, Section and Paragraph structure.

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

Revenue Recognition - Our revenues are recognized in accordance with FASB ASC Topic 985-605 “Revenue Recognition” for the software industry.  Revenue from the sale of software licenses is recognized when standardized software modules are delivered to and accepted by the customer, the license term has begun, the fee is fixed or determinable and 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.
 
Subsequent Events – The Company evaluated subsequent events, which are events or transactions that occurred after October 31, 2010 through the issuance of the accompanying consolidated financial statements.
 
 
MOBIFORM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2010
 

(3)           Summary of Significant Accounting Policies (Continued)

Fair Value of Financial Statements – FASB ASC Topic 825 “Financial Instruments”  requires the disclosure of fair values for all financial statements, both on-and off-balance-sheet, for which it is practicable to estimate fair value. We estimate that there are no material variations between fair value and book value of our financial assets and liabilities as of October 31, 2010 and 2009.  We generally do not require collateral related to our financial instruments.

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

We maintain our cash and cash equivalents and certificates of deposit in accounts with a major financial institution in the United States in the form of demand deposits and certificates of deposit.  Deposits in these banks may exceed the amounts of insurance provided on such deposits.  No such amounts were at risk as of October 31, 2010 and 2009.

Concentrations of credit risk with respect to trade accounts receivable are limited.  We routinely assess the financial strength of customers and, based upon factors concerning credit risk, we establish an allowance for doubtful accounts.  As of October 31, 2010 and 2009, based on this assessment, management established an allowance for doubtful accounts of $-0- and $5,440, respectively.  Management believes that accounts receivable credit risk exposure beyond such allowance is limited.

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

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

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

 
MOBIFORM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2010
 

 
(3)  
Summary of Significant Accounting Policies (Continued)

Advertising Expense - We expense advertising costs as incurred.

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

Income Taxes – We account for income taxes under the provisions of FASB ASC Topic 740 “Income Taxes” (“Topic 740”) which requires the use of the liability method of accounting for income taxes. The liability method measures deferred income taxes by applying enacted statutory rates in effect at the balance sheet date to the differences between the tax basis of assets and liabilities and their reported amounts on the financial statements. The resulting deferred tax assets or liabilities are adjusted to reflect changes in tax laws as they occur. A valuation allowance is provided when it is more likely than not that a deferred tax asset will not be realized. At October 31, 2010 and 2009, the entire deferred tax asset, which arises primarily from our net operating losses, has been fully reserved because management has determined that it is not more likely than not that the net operating loss carry forwards will be realized in the future.

We do not believe we have any uncertain tax positions deemed material as of October 31, 2010 and 2009. With few exceptions, we believe we are no longer subject to U.S. federal and state income tax examinations by tax authorities for tax periods prior to fiscal 2007. Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense.  As of October 31, 2010 and 2009, we had no accrued interest or penalties.  We  currently have no federal or state tax  examinations  in progress nor have we had  any  federal  or  state  tax  examinations  since our inception.

Earnings (Loss) Per Share  -  Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the amount of earnings for the period available to each share of common stock outstanding during the reporting period, while giving effect to all dilutive potential common shares that were outstanding during the period, such as common shares that could result from the potential exercise or conversion of securities into common stock.  The assumed exercise of common stock equivalents was not utilized in the years ended October 31, 2010 and 2009 since the effect would be anti-dilutive.  Equity instruments that may dilute earnings per share in the future are listed in Notes 6, 7 and 10.

Research and Development Costs - Research and development costs are expensed as incurred. There were no research and development costs in 2010 and 2009.

Reclassifications – Certain fiscal 2009 expenses have been reclassified to conform to fiscal 2010 presentation.
 
 
MOBIFORM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2010


(4)           New Authoritative Accounting Guidance

In January 2010, the Financial Accounting Standards Board ("FASB") issued, and the Company adopted, Accounting Standards Codification (“ASC”) Update No. 2010-05 “Escrowed Share Arrangements and the Presumption of Compensation” (“ASCU No. 2010-05”). ASCU No. 2010-05 codifies the SEC staff’s views on escrowed share arrangements which historically has been that the release of such shares to certain shareholders based on performance criteria is presumed to be compensatory. When evaluating whether the presumption of compensation has been overcome, the substance of the arrangement should be considered, including whether the transaction was entered into for a reason unrelated to employment, such as to facilitate a financing transaction. In general, in financing transactions the escrowed shares should be reflected as a discount in the allocation of proceeds. In debt financings the discounts are to be amortized using the effective interest method, while discounts on equity financings are not generally amortized. As it relates to future financings, the adoption of this update may have an effect on the Company’s financial statements.

In January 2010, the FASB issued ASC Update No. 2010-06 “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements” which updated guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. This update requires new disclosures on significant transfers of assets and liabilities between Level 1 and Level 2 of the fair value hierarchy (including the reasons for these transfers) and the reasons for any transfers in or out of Level 3. This update also requires a reconciliation of recurring Level 3 measurements about purchases, sales, issuances and settlements on a gross basis. In addition to these new disclosure requirements, this update clarifies certain existing disclosure requirements. For example, this update clarifies that reporting entities are required to provide fair value measurement disclosures for each class of assets and liabilities rather than each major category of assets and liabilities. This update also clarifies the requirement for entities to disclose information about both the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements. This update will become effective for the Company with the interim and annual reporting period beginning November 1, 2010, except for the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will become effective for the Company with the interim and annual reporting period beginning November 1, 2011. The Company will not be required to provide the amended disclosures for any previous periods presented for comparative purposes. Other than requiring additional disclosures, adoption of this update will not have a material effect on the Company's 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.

 
MOBIFORM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2010


(5)           Property and Equipment

Property and equipment consists of the following:

   
October 31,
    
October 31,
  
Estimated
   
2010
    
2009
  
Useful Lives
               
Computer Equipment
   $ 35,951     $ 30,023  
5 years
Office Equipment
     24,432       24,432  
5-7 years
Software
     21,566       16,935  
3 years
Total
     81,949       71,390    
Less: Accumulated Depreciation and Amortization
     (52,544 )     (38,622 )  
    $ 29,405     $ 32,768    
 
(6)           Convertible Debt

At October 31, 2010 and 2009, we have $50,000 of promissory convertible notes outstanding.  The notes are convertible into shares of our common stock at $0.50 per share at any time prior to maturity.  Interest on the notes at 8% per annum is payable at such time the notes are converted and/or at such time the notes are due and payable in cash and/or in shares of our common stock at the option of the noteholder.

Interest expense on convertible debt for the years ended October 31, 2010 and 2009 amounted to $4,000 and $4,461, respectively.

In January 2009, one of our promissory convertible noteholders converted $25,000 in notes and $4,062 of accrued interest into 58,124 shares of our common stock.

(7)           Stockholders’ Equity

We are authorized to issue 100,000,000 shares of common stock, par value $0.0001 per share and 5,000,000 shares of preferred stock, par value $0.0001 per share. At October 31, 2010 there were 24,586,672 common shares issued and outstanding.  An additional 11,595,084 common shares were reserved for issuance as of October 31, 2010 for outstanding purchase warrants and convertible debt.  There are no shares of preferred stock issued and outstanding.

In January 2009, one of our promissory convertible noteholders converted $25,000 in notes and $4,062 of accrued interest into 58,124 shares of our common stock.
 
 
MOBIFORM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2010


(7)           Stockholders’ Equity (Continued)

In June 2009, we issued 100,000 shares of our common stock to a consultant for services to be performed as defined in the consulting agreement.  The shares were valued at $60,000 which was the cash value, as defined in the agreement, if the shares were not issued. The amount is accounted for as a prepaid asset and is to be expensed over the life of the agreement which term ended June of 2010. In the years ended October 31, 2010 and 2009, approximately $39,000 and $21,000, respectively, has been expensed.

In June 2009, we issued 407 shares of our common stock to one of the previous shareholders of Mobiform Canada which were required to be issued per the original exchange agreement (See Note 1).

On July 29, 2009, we issued 400,000 shares of our common stock to a consultant for services to be rendered per a consulting agreement effective August 1, 2009.  The shares, which were deemed earned upon the signing of the agreement, were valued at $156,000 ($0.39 per share) and expensed in the year ended October 31, 2009. Additionally, the consultant was to be issued 25,000 fully vested common shares each month over the six month term of the agreement (total of 150,000 shares).(See Note 10).

In August 2009, we issued 200,000 shares of our common stock to our Vice-President per his consultant agreement (see Note 10).

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

We entered into a consulting agreement on January 1, 2007 that either party could cancel upon 10 days notice. As part of the compensation for services, the consultant was to receive an aggregate of 750,000 shares of the Company’s common stock. The consultant earned and was issued 350,000 shares. The issuance of the remaining 400,000 common shares was contingent upon certain actions by us. Since it was and remains our intent that such actions would be fulfilled, we charged operations in 2007 and 2008 for the value of such common shares and had an accrued common share liability at October 31, 2008 of $400,000 for the fair value of the 400,000 shares. During the first quarter of fiscal 2009 we mutually agreed with the consultant to cancel the obligation to issue the 400,000 common shares. As a result, we reduced the accrued common share liability and recorded a gain from derecognition of common share liability for $400,000 in the year ended October 31, 2009.

On September 24, 2009, our Board of Directors authorized the extension of the expiration date of the common stock purchase warrants issued in our 2007 equity private placement. The warrants, exercisable at $1.50 per share, were set to expire on December 31, 2009. The expiration date has now been extended to December 31, 2011. There has been no modification to the exercise price. An aggregate of 3,471,000 warrants have been extended. The fair value of the warrants, estimated at approximately $15,000 as of the modification date using the Black-Scholes pricing model, is accounted for in equity as a capital raise cost which is offset by an identical amount in additional paid in capital.

 
MOBIFORM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2010


(7)           Stockholders’ Equity (Continued)

During the year ended October 31, 2009, warrants issued to employees to acquire 190,000 common shares at $1.50 per share were forfeited due to separation of services.  In June 2009, our CEO and former Secretary voluntarily cancelled warrants to purchase 6,000,000 common shares at $0.75 per share.

In January 2010, we issued 150,000 shares of our common stock for a share liability of $58,500 incurred for consulting services. In the year ended October 31, 2010, a $29,250 expense related to this agreement and $43,950 deferred under other consulting agreements were charged to operations as share-based consulting.

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

At October 31, 2010, we have 4,424,000 outstanding warrants to employees.  The fair value of all the warrants issued for services is being charged to operations over the periods the warrants vest.  Amortization of the fair values charged to operations as determined by the Black-Scholes pricing model was $63,336 in the year ended October 31, 2009.  We had no such charge in the year ended October 31, 2010.   All the warrants have cashless exercise provisions as defined in the warrants.

We entered into a consulting agreement on February 5, 2010 for financial consulting services (see Note 10).  As part of the compensation for services, the consultant was granted a five-year warrant to purchase 300,000 shares of our common stock at the market price per share on the date of issuance, which was $0.09.  The warrant vests 25% on the date of issuance and every three months thereafter and has cashless exercise provisions as defined in the warrant.  The fair value of the warrant, $5,883, was calculated using the Black-Scholes pricing model with the following assumptions: 0% dividend yield; 0.4% risk free interest rate; 23.81% volatility; 5 year expected life.  Share-based expense based on the fair value of the warrant is being charged to operations over the vesting period.  The expense recorded in the year ended October 31, 2010 was $4,374.

The fair value of each warrant is estimated on the date of grant using the Black-Scholes pricing model.  The following weighted-average assumptions were made in estimating fair value:

   
October 31, 2010
    
October 31, 2009
  
             
Dividend Yield
     - %     - %
Risk-Free Interest Rate
     0.4 %     0.93 %
Expected Life
  
5 Years
    
2 Years
  
Expected Volatility
     23.81 %     44.42 %

 
MOBIFORM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2010


(7)           Stockholders’ Equity (Continued)

The following table summarizes the warrants and options.

   
For the Year Ended
    
For the Year Ended
  
   
October 31, 2010
    
October 31, 2009
  
   
Shares
    
Weighted Average Exercise Price
    
Shares
    
Weighted Average Exercise Price
  
                         
Outstanding at beginning
                        
of period
     11,663,750     $ 0.68       17,313,750     $ 0.73  
Granted/Sold
     300,000     $ 0.09       540,000     $ 0.25  
Expired/Cancelled
     (500,000 )   $ 0.20       (6,000,000 )   $ 0.75  
Forfeited
     -       -       (190,000 )   $ 1.50  
Exercised
     -       -       -       -  
Outstanding at end of period
     11,463,750     $ 0.69       11,663,750     $ 0.68  
 
The following table summarizes information about stock warrants and options outstanding as of October 31, 2010:
 
     
Warrants and Options
     
Outstanding
   Exercisable   
           
Weighted-
                    
           
Average
                    
           
Remaining
    
Weighted-
          
Weighted
  
           
Contractual
    
Average
          
Average
  
     
Number
    
Life
    
Exercise
    
Number
    
Exercise
  
Exercise Price
    
Outstanding
    
(in Years)
    
Price
    
Exercisable
    
Price
  
$ 0.09       300,000       4.25     $ 0.09       225,000     $ 0.09  
$ 0.20       5,130,000       0.56     $ 0.20       5,130,000     $ 0.20  
$ 0.25       540,000       0.83     $ 0.25       540,000     $ 0.25  
$ 0.75       2,022,750       1.60     $ 0.75       2,022,750     $ 0.75  
$ 1.50       3,471,000       1.17     $ 1.50       3,471,000     $ 1.50  

 
MOBIFORM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2010


(7)           Stockholders’ Equity (Continued)

The following table summarizes information about stock warrants and options outstanding as of October 31, 2009:
 
     
Warrants and Options
     
Outstanding
    
Exercisable
  
           
Weighted-
                    
           
Average
                    
           
Remaining
    
Weighted
          
Weighted-
  
           
Contractual
    
Average
          
Average
  
     
Number
    
Life
    
Exercise
    
Number
    
Exercise
  
Exercise Price
    
Outstanding
    
(in Years)
    
Price
    
Exercisable
    
Price
  
$ 0.20       5,630,000       1.42     $ 0.20       5,630,000     $ 0.20  
$ 0.25       540,000       1.83     $ 0.25       540,000     $ 0.25  
$ 0.75       2,022,750       2.63     $ 0.75       2,022,750     $ 0.75  
$ 1.50       3,471,000       2.17     $ 1.50       3,471,000     $ 1.50  

At October 31, 2010 and 2009, the weighted-average exercise price of all warrants and options was $ $0.69 and $0.68, respectively, and the weighted-average remaining contractual life was 1.04 and 1.87 years, respectively.

(8)           Income Taxes

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

   
For the Years Ended
  
   
October 31,
  
   
2010
    
2009
  
United States Statutory Corporate
            
  Income Tax Rate
     (34.0 )%     (34.0 )%
Permanent Differences
     - %     - %
Change in Valuation Allowance on
                
  Deferred Tax Assets
     34.0 %     34.0 %
Effect of Foreign Earnings, Net of
                
 Allowable Credits
     - %     - %
                 
Income Tax Provision (Benefit)
     - %     - %

 
MOBIFORM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2010


(8)           Income Taxes (Continued)

The components of deferred tax assets (liabilities) at October 31, 2010 and 2009 are as follows:

   
2010
    
2009
  
Deferred Tax Assets – Current
            
Accrued Vacation Pay
   $ 6,689     $ 6,400  
Allowance for Doubtful Accounts
     -       1,850  
Valuation Allowance
     (6,689 )     (8,250 )
      -       -  
Deferred Tax Assets (Liabilities) – Long Term
                
Net Operating Losses
   $ 1,278,058     $ 1,230,675  
Property and Equipment
     (3,762 )     2,470  
Equity Instruments
     573,944       554,156  
Valuation Allowance
     (1,848,240 )     (1,787,301 )
                 
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 increased by approximately $59,000 and $244,000 in the years ended October 31, 2010 and 2009, respectively.

(9)           Related Party Transactions

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

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

Interest expense in the amount of $8,000 and $164 has been accrued for these notes in the years ended October 31, 2010 and 2009, respectively.
 
 
MOBIFORM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2010

 
(10)         Commitments and Contingencies

Employment Agreements

We currently employ our Chief Executive Officer (“CEO”) at an annual salary of $150,000.  Since April 1, 2009, the CEO’s compensation has continued at the same annual salary as per the terms of his two year contract extension dated April 1, 2007 and will remain in effect until a new agreement is executed. In June 2009, our CEO voluntarily surrendered a warrant to purchase 3,500,000 shares of our common stock at $0.75 per share and it was cancelled.

In June 2009, our former Secretary voluntarily surrendered a warrant to purchase 2,500,000 shares of our common stock at $0.75 per share and it was cancelled. A warrant to purchase 2,000,000 shares of our common stock exercisable at $0.20 per share was retained by the former Secretary.

We have agreements with a number of other employees that are renewed on an annual basis.  Our hiring policy previously incorporated the issuance of warrants to purchase common stock in connection with employment agreements.  There were no warrant issuances in the years ended October 31, 2010 and 2009 and we presently intend to continue this policy.  During the year ended October 31, 2009, 190,000 of warrants issued pursuant to employment agreements were forfeited upon employee termination.

Consultants

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

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

 
MOBIFORM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2010




(10)  
Commitments and Contingencies (Continued)

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

Leases

We presently lease office space in the United States, generally on an annual basis.  Rental expense for the years ended October 31, 2010 and 2009 amounted to approximately $30,000 and $41,000, respectively.  In May 2008, our office lease agreement was extended for a one year period through May 2009 at approximately $4,000 per month. Effective June 1, 2009, the agreement was extended for a one year period through May 2010. The terms were revised to 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.  Subsequent to May 2010 the lease is effective on a month to month basis under similar terms.

Investment Banking Agreement

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

Significant Customers

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

In fiscal 2009, four customers generated 26%, 17%, 12% and 11% of our revenues.  One such customer accounted for 55% of our accounts receivable at October 31, 2009.