10-Q 1 f10q0113_mobilebits.htm QUARTERLY REPORT f10q0113_mobilebits.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
 
FORM 10-Q
_______________
 
(Mark One)
 
x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended January 31, 2013
 
or
 
o  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

MobileBits Holdings Corporation
(Exact name of registrant as specified in its charter)

Nevada
 
000-156062
 
26-3033276
(State or other jurisdiction of incorporation or organization)
 
(Commission File Number)
 
(I.R.S. Employer Identification No.)
 
5901 N. Honere Ave., Suite 110
Sarasota,  Florida
 
34243
(Address of principal executive offices)
 
 (Zip Code)
______________
 
(941) 225-6115
(Registrant’s telephone number, including area code)
_______________
 
Not applicable
(Former name, former address and former fiscal year, if changed since last report)

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

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

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer
o
Accelerated Filer
o
Non-Accelerated Filer
(Do not check if a smaller reporting company)
o
Smaller Reporting Company
x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock: As of March 13, 2013, the Company had 65,854,188  shares of common stock issued and outstanding.
 
 
 

 
 
MobileBits Holdings Corporation
FORM 10-Q
For period ended January 31, 2013

INDEX

PART I-- FINANCIAL INFORMATION
Item 1.
Financial Statements
3
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
20
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
25
Item 4.
Controls and Procedures
25
PART II-- OTHER INFORMATION
 
Item 1.
Legal Proceedings
26
Item 1A.
Risk Factors
26
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
26
Item 3.
Defaults Upon Senior Securities
27
Item 4.
Mine Safety Disclosures
27
Item 5.
Other Information
27
Item 6.
Exhibits
27
SIGNATURES
 
 
 

 
 
PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

MobileBits Holdings Corporation
Consolidated Financial Statements
January 31, 2013
(Unaudited)

CONTENTS
 
 
Page(s)
Consolidated Financial Statements:
 
   
Consolidated Balance Sheets - As of January 31, 2013 and October 31, 2012
4
   
Consolidated Statements of Operations - For the three months ended January 31, 2013 and 2012
5
   
Consolidated Statements of Cash Flows - For the three months ended January 31, 2013 and 2012,
6
   
Notes to Consolidated Financial Statements
7
    
 
3

 
 
MobileBits Holdings Corporation
Consolidated Balance Sheets
(Unaudited)
 
   
January 31,
   
October 31,
 
   
2013
   
2012
 
ASSETS
 
Current assets:
           
Cash
 
$
55,650
   
$
122,428
 
Investment in marketable securities
   
222
     
222
 
Accounts receivable, net of allowance for doubtful accounts
   
94,094
     
95,058
 
Prepaid expenses and other current assets
   
58,028
     
62,761
 
Total current assets
   
207,994
     
280,469
 
                 
Property and equipment, net of accumulated depreciation
   
39,052
     
40,758
 
Software development costs, net of accumulated amortization
   
245,476
     
159,733
 
Intangible assets, net of accumulated amortization
   
5,585,336
     
6,020,641
 
Goodwill
   
16,107,034
     
16,107,034
 
                 
TOTAL ASSETS
 
$
22,184,892
   
$
22,608,635
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
               
Accounts payable and accrued expenses
 
$
634,607
   
$
669,975
 
Accounts payable and accrued expenses – related parties
   
620,596
     
630,878
 
Stock payable
   
563,000
     
122,000
 
Note payable– related parties
   
61,575
     
54,325
 
Deferred revenues
   
394
     
8,900
 
Total current liabilities
   
1,880,172
     
1,486,078
 
                 
Commitments and contingencies
               
                 
Stockholders’ equity:
               
Preferred stock, $0.001 par value; 10,000,000 shares
               
authorized; none issued and outstanding
   
-
     
-
 
Common stock, $0.001 par value; 250,000,000 shares authorized; 65,854,188 and 65,182,188 shares issued and
               
outstanding, respectively
   
65,854
     
65,182
 
Additional paid-in capital
   
38,329,191
     
37,233,950
 
Accumulated deficit
   
(18,096,073
   
(16,171,696
)
Accumulated other comprehensive gain (loss)
   
5,748
     
(4,879
)
Total stockholders' equity
   
20,304,720
     
21,122,557
 
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
22,184,892
   
$
22,608,635
 
 
See accompanying summary of accounting policies and notes to consolidated financial statements.
 
 
4

 

MobileBits Holdings Corporation
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
 
   
For the Three Months Ended
January 31,
 
   
2013
   
2012
 
         
(Restated)
 
REVENUES
 
$
157,979
   
$
74,880
 
COST OF REVENUES
   
25,629
     
22,491
 
                 
GROSS PROFIT
   
132,350
     
52,389
 
                 
OPERATING EXPENSES:
               
General and administrative
   
1,596,678
     
5,221,848
 
Depreciation and amortization expense
   
468,028
     
164,717
 
Total operating expenses
   
2,064,706
     
5,386,565
 
                 
LOSS FROM OPERATIONS
   
(1,932,356
)
   
(5,334,176
)
                 
OTHER INCOME (EXPENSE)
               
Unrealized foreign currency exchange gain
   
11,089
 
      -  
Interest expense, net
   
(3,110
)
   
(229,057
)
                 
NET LOSS
   
(1,924,377
)
   
(5,563,233
)
                 
OTHER COMPREHENSIVE GAIN
               
       Foreign currency translation gain
   
10,627
        -  
TOTAL COMPREHENSIVE LOSS
 
$
(1,913,750
)
 
$
(5,563,233
)
                 
Net loss per common share - basic and diluted
 
$
(0.03
)
 
$
(0.13
)
                 
Weighted average number of common shares outstanding during the period - basic and diluted
   
65,546,905
     
42,645,050
 
 
See accompanying summary of accounting policies and notes to consolidated financial statements.
 
 
5

 
 
MobileBits Holdings Corporation
Consolidated Statements of Cash Flows
(Unaudited)
 
   
For the Three Months Ended
 
   
January 31,
 
   
2013
   
2012
 
CASH FLOWS FROM OPERATING ACTIVITIES
       
(Restated)
 
Net loss
 
$
(1,924,377
)
 
$
(5,563,233
)
Adjustments to reconcile net loss to net cash
               
used in operating activities:
               
  Bad debt expense
   
165
     
44,858
 
  Common shares issued for interest expense
    -      
224,160
 
  Stock-based compensation
   
759,913
     
4,601,101
 
  Depreciation and amortization
   
468,028
     
164,717
 
  Unrealized gain on foreign currency exchange
   
(11,089
)     -  
Changes in operating assets and liabilities:
               
    Decrease (increase) in accounts receivable
   
799
     
(58,940
)
    Decrease in prepaid expenses
   
4,733
     
8,523
 
    Increase (decrease) in accounts payable
   
(35,368
)
   
76,293
 
    Decrease in accounts payable – related parties
   
(10,282
)
   
(66,066
)
    Increase (decrease) in deferred revenues
   
(8,837
)
   
33,000
 
Net cash used in operating activities
   
(756,315
)
   
(535,587
)
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
  Software development costs incurred
   
(102,082
)
   
(35,856
)
  Purchase of property and equipment
   
(5,000
)
    -  
Net cash used in investing activities
   
(107,082
)
   
  (35,856
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
  Increase in notes payable
   
7,250
        -  
  Proceeds from issuances of common stock, net
   
777,000
     
257,000
 
  Commissions paid on common stock-related party      -       (20,000 )
Net cash provided by financing activities
   
784,250
     
237,000
 
                 
Effect of exchange rate changes on cash
   
12,369
        -  
                 
Net decrease in cash
   
(66,778
)    
(334,443
)
Cash at beginning of period
   
122,428
     
1,330,166
 
Cash at end of period
 
$
55,650
   
$
995,723
 
                 
Cash paid for:
               
  Interest
 
$
904
   
$
2,197
 
  Income tax
   
-
     
-
 
                 
Noncash investing and financing activiites:
               
  Common shares issued for notes payable
   
-
     
81,000
 
  Commissions due on common stock sales - related party
   
-
     
20,000
 
  Cancellation of shares – related party
   
-
     
3,000
 
  Fair value of common shares issued to acquire Pringo, Inc.
   
-
     
18,744,521
 
 
See accompanying summary of accounting policies and notes to consolidated financial statements.
 
 
6

 
 
   MobileBits Holdings Corporation
Notes to Consolidated Financial Statements
(Unaudited)

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements of MobileBits Holdings Corporation (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In management's opinion, all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation. The interim results for the period ended January 31, 2013 are not necessarily indicative of results for the full fiscal year.

The unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes, which are included as part of the Company’s Form 10-K for the year ended October 31, 2012.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Use of Estimates
 
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from estimates. 
 
Significant estimates made by the Company in 2013 and 2012 included: 1)  100% valuation allowance for deferred taxes due to the Company’s continuing and expected future losses; 2) inputs used in its option-pricing model to calculate the Company share-based compensation arrangements; 3) allowance estimated for doubtful accounts; 4) assumptions used in the valuation models to calculate the fair values of assets acquired and liabilities assumed under acquisitions; and 5) assumptions used in the projections and discounted cash flows analysis to assess the goodwill impairment.

Principles of Consolidation

The consolidated financial statements include the Company’s accounts and those of the Company’s wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Reclassifications and Restatements

For the three months ended January 31, 2012:

The Company restated its January 31, 2012 Consolidated Statements of Operations and Comprehensive Loss and Cash Flows to reflect the following adjustments:

Stock option grants issued in connection with the Pringo Merger as of the acquisition date originally expensed in the three month period ended January 31, 2012 should have been considered in determining the original purchase price.
Acquired software development costs in connection with the Pringo Merger originally capitalized were eliminated in determining the final purchase price.
 
The impact of the restatement on the Consolidated Statements of Operations and Comprehensive Loss for the three months ended January 31, 2012 is as follows:
 
   
As originally
             
   
Reported
   
Change
   
Restated
 
General and administrative
  $ 9,239,597     $ (4,017,749 )   $ 5,221,848  
Depreciation and amortization expense
    188,999       (24,282 )     164,717  
Total operating expenses
    9,428,596       (4,042,031 )     5,386,565  
Loss from operations
    (9,376,207 )     4,042,031       (5,334,176 )
Net loss
    (9,605,264 )     4,042,031       (5,563,233 )
Total comprehensive loss
    (9,605,264 )     4,042,031       (5,563,233 )
Net loss per common share - basic and diluted
    (0.23 )     0.10       (0.13 )
 
The impact of the restatement on the Consolidated Statements of Cash Flows for the three months ended January 31, 2012 is as follows:
 
   
As originally
             
   
Reported
   
Change
   
Restated
 
Net Loss
  $ (9,605,264 )   $ 4,042,031     $ (5,563,233 )
Stock based compensation
    8,618,850       (4,017,749 )     4,601,101  
Depreciation and amortization
    188,999       (24,282 )     164,717  
Fair value of common shares issued to Pringo, Inc.
    14,726,772       4,017,749       18,744,521  
 
 
7

 
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF OPERATIONS

Operations and Merger

MobileBits Holdings Corporation, formerly Bellmore Corporation (“BC”) was incorporated in the State of Nevada on July 22, 2008.  On January 25, 2010, BC changed its name to MobileBits Holdings Corporation (the “Company”, “MobileBits” or “MB”).
 
MobileBits Corporation (“MBC”) was incorporated in Florida on March 2009. The business was founded with the intention of providing a platform that connected marketers to consumers around meaningful content available on mobile devices.

The Company entered into a Share Exchange Agreement, dated March 12, 2010 (the “ Share Exchange Agreement”) between MBC and the shareholders of MBC (the “MBC Shareholders”) pursuant to which MB acquired MBC, an early stage software development firm targeting its software at the mobile search market.
 
The transaction closed on March 12, 2010 and MB acquired 100% of the outstanding shares of common stock of MBC (the “MBC Stock”) from the MBC Shareholders. In exchange for MBC common stock and $275,000, MB issued 18,752,377 shares of its common stock to the MBC Shareholders, which represented approximately 87.9% of MB’s issued and outstanding common stock.  Upon closing, MBC became a 100% wholly-owned subsidiary of the Company.  
 
Pringo Acquisition
 
On December 6, 2011, through MB Pringo Merger Sub, Inc., a Delaware corporation and our wholly-owned subsidiary (“Merger Sub”), MobileBits completed a merger with Pringo, Inc. a Delaware corporation (“Pringo”), pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated June 23, 2011 (the “Pringo Merger”). As a result of the Merger, Merger Sub merged with and into Pringo, with Pringo surviving the Merger as the Company’s wholly owned subsidiary.
  
Pursuant to the Merger Agreement, each share of common stock of Pringo issued and outstanding immediately prior to the effective time, was converted into the right to receive a number of shares of our common stock such that immediately after the Merger,  Pringo’s stockholders, and the holders of Pringo’s outstanding options and warrants, owned fifty percent (50%) of our then outstanding shares of common stock on a fully diluted basis (as if all of Pringo’s and Parent’s options and warrants were exercised), and our stockholders, and holders of our outstanding options and warrants, owned fifty percent (50%) of its then outstanding shares of our common stock on a fully diluted basis (as if all of Pringo’s and our options and warrants were exercised).  At the closing of the Pringo Merger on December 6, 2011, Pringo’s stockholders immediately prior to the Pringo Merger were issued 29,453,544 shares of common stock of MobileBits.
 
Pringo is a Delaware “C” Corporation headquartered in Los Angeles, California. Established in 2006, Pringo offers software products that combine multi-lingual enterprise-class portals, content management systems, social collaboration features, and user management tools in open-source development packages. Pringo distinguishes itself from other products in the market in four distinct areas: Pringo products are offered in an open-architecture format; available in 23 languages; Pringo products are easily integrated and deployed by enterprises; and Pringo offers over 400 customizable features.
 
Aixum Acquisition
 
On September 28, 2012, the Company completed a share exchange with Aixum Tec AG, a Liechtenstein Company (“Aixum”), pursuant to a Stock Exchange Agreement (the “Stock Exchange Agreement”), dated May 21, 2012 (the “Stock Exchange”). As a result of the Stock Exchange Aixum is a wholly-owned subsidiary of MobileBits.
 
Pursuant to the Stock Exchange Agreement, at the closing of the Stock Exchange each seller (a “seller”, and collectively, the “Sellers”) sold to the Company its shares of Aixum (the “Transferred Shares”). In consideration for the Transferred Shares, the Company issued to each Seller such seller’s pro rata portion of a number of shares of the Common Stock, par value $0.001 per share, of the Company, equal to (A) 6,666,667 minus (B) the sum of (i) the Liability Shares (as defined in the Stock Exchange Agreement), if any, plus (ii) the Cost Shares (as defined in the Stock Exchange Agreement), if any. On the Closing Date, MobileBits issued an aggregate of 5,803,061 of its Common Stock to the Sellers valued at $2,901,531.
 
 
8

 
 
Aixum owns the rights to the propriety network solution known as SAMY4ME which provides a cloud-based software platform making it simple for any business to create their own mobile advertising campaigns and publish to a targeted subscribed mobile audience delivered to smartphones. SAMY4ME distinguishes itself by providing a mobile application for consumers and a cloud based campaign manager software for merchants to send coupons and synchronize loyalty card information.
 
Cash and Cash Equivalents
 
We consider short term, highly liquid investments that have an original maturity of three months or less to be cash equivalents. The Company maintains its cash balances in two financial institutions.  The balances are insured by the Federal Deposit Insurance Corporation (“FDIC”).  At January 31, 2013 and October 31, 2012, the Company had cash balances of $55,650 and $122,428, respectively, all of which was insured.
 
Investment in Marketable Securities
 
The Company determines the appropriate classification of its investments in debt and equity securities at the time of purchase and reevaluates such determinations at each balance sheet date. Debt securities are classified as held to maturity when the Company has the positive intent and ability to hold the securities to maturity. Debt securities for which the Company does not have the intent or ability to hold to maturity are classified as available for sale. Held-to-maturity securities are recorded as either short term or long term on the Balance Sheet, based on contractual maturity date and are stated at amortized cost. Marketable securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value, with unrealized gains and losses recognized in earnings. Debt and marketable equity securities not classified as held to maturity or as trading, are classified as available for sale, and are carried at fair market value, with the unrealized gains and losses, net of tax, included in the determination of comprehensive income and reported in shareholders’ equity.
 
The fair value of substantially all securities is determined by quoted market prices. The estimated fair value of securities for which there are no quoted market prices is based on similar types of securities that are traded in the market.
 
Accounts Receivable and Allowance for Bad Debt
 
The allowance for doubtful accounts is based on the Company’s past experience and other factors which, in management's judgment, deserve current recognition in estimating bad debts. Such factors include growth and composition of accounts receivable, the relationship of the allowance for doubtful accounts to accounts receivable and current economic conditions. The determination of the collectability of amounts due from customer accounts requires the Company to make judgments regarding future events and trends. Allowance for doubtful accounts is determined based on assessing the Company’s portfolio on an individual customer and on an overall basis. This process consists of a review of historical collection experience, current aging status of the customer accounts, and the financial condition of the Company’s customers. Based on a review of these factors, the Company establishes or adjusts the allowance for specific customers and the accounts receivable portfolio as a whole. At January 31, 2013 and October 31 2012, the allowance for doubtful accounts totaled $225,676 and $225,511, respectively. For the three months ended January 31, 2013 and 2012, the Company recorded bad debt expense of $165 and $44,858.
 
 
9

 
 
Property and Equipment
 
Property and equipment are stated at cost. Depreciation is computed over the estimated useful lives of the related assets using the straight-line method for financial reporting purposes.
 
Expenditures for normal repairs and maintenance are charged to expense as incurred. Significant renewals and improvements are capitalized. The cost and related accumulated depreciation of assets retired or otherwise disposed of are eliminated from the accounts, and any resulting gain or loss is recognized in the year of disposal.
 
Long-Lived Assets
 
We review our long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted future cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value.
 
Software Development Costs
 
Costs of software developed internally for licensing to third parties are expensed until the technological feasibility of the software product has been established. Thereafter, software development costs incurred through the general release of the software products are capitalized and subsequently reported at the lower of unamortized cost or net realizable value. Capitalized software development costs are amortized on a straight-line basis over the products’ respective estimated economic lives, which are typically three years. The amortization of capitalized software development costs, including any amounts accelerated for products that are not expected to generate sufficient future revenue to realize their carrying values, is included in depreciation and amortization expense in the consolidated statements of operations.
 
Intangible Assets
 
Intangible assets consist of expenditures for a domain name, the value of trade name, customer relationships, and software, which was initially recorded at the fair value on the acquisition date of Aixum and Pringo. The domain name has an estimated indefinite life, is not subject to amortization, but is reviewed annually for impairment. The identifiable intangibles are amortized over their useful lives of 3 to 10 years and are reviewed annually for impairment.
  
Goodwill
 
Costs of investments in excess of the underlying fair value of net assets at the date of acquisition are recorded as goodwill and assessed annually for impairment. The carrying amount of goodwill is not amortized, but we perform an annual assessment of goodwill for impairment by first comparing the book value of net assets to the fair value of the reporting units.  If the fair value is determined to be less than the book value or qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value.
 
Fair Value of Financial Instruments
 
Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
 
Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
 
Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.
 
 
10

 
 
Level 3 Inputs – Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity's own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.
 
Income Taxes
 
The Company is a taxable entity and recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to be in effect when the temporary differences reverse. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the enactment date of the rate change. A valuation allowance is used to reduce deferred tax assets to the amount that is more likely than not to be realized. Interest and penalties associated with income taxes are included in selling, general and administrative expense.
 
The Company has adopted ASC Topic 740 “Accounting for Uncertainty in Income Taxes” which prescribes a comprehensive model of how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return.  ASC 740 states that a tax benefit from an uncertain position may be recognized if it is "more likely than not" that the position is sustainable, based upon its technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. As of January 31, 2013 and October 31, 2012, the Company had not recorded any tax benefits from uncertain tax positions.
 
Revenue Recognition
 
License revenue consists principally of revenue earned under software license agreements. License revenue is generally recognized when a signed contract or other persuasive evidence of an arrangement exists, the software has been electronically delivered, the license fee is fixed or is measured on a paid user basis; and collection of the resulting receivable is probable. When contracts contain multiple elements wherein Vendor-Specific Objective Evidence (“VSOE”) exists for all undelivered elements, we account for the delivered elements in accordance with the “Residual Method.” VSOE of fair value for maintenance and support is established by a stated renewal rate, if substantive, included in the license arrangement or rates charged in stand-alone sales of maintenance and support. Revenue from subscription license agreements, which include software, rights to unspecified future products and maintenance, is recognized ratably over the term of the subscription period.
 
Provided all other revenue criteria are met, the upfront, minimum, non-refundable license fees from customers are generally recognized upon delivery and on-going royalty fees are generally recognized upon reports of new licenses issued. Revenue on sales to resellers is recognized when evidence of an end user arrangement exists and recorded net of related costs to the resellers.
 
Professional services revenue consists primarily of revenue received for assisting with the customization and implementation of our software, on-site support, and other consulting services. Many customers who license our software also enter into separate professional services arrangements with us. We always account for professional services separately from license revenue as professional services are considered essential to the functionality of the software based on the nature of our software products. Substantially all of our professional services arrangements that are billed on a time and materials basis are recognized as the services are performed. Contracts with fixed or not-to-exceed fees are recognized on a percentage-of-completion. If there is significant uncertainty about the project completion or receipt of payment for professional services, revenue is deferred until the uncertainty is sufficiently resolved. VSOE of fair value of consulting services is based upon stand-alone sales of those services. Payments received in advance of consulting services performed are deferred and recognized when the related services are performed. Work performed and expenses incurred in advance of invoicing are recorded as unbilled receivables. These amounts are billed in the subsequent month.
 
 
11

 
 
Maintenance revenue consists of fees for providing software updates on a when and if available basis and technical support for software products (“post-contract customer support” or “PCS”). Maintenance revenue is recognized ratably over the term of the agreement.
 
Hosting revenues are recognized in the month services are delivered.
 
Payments received in advance of services performed are deferred. Allowances for estimated future returns and discounts are provided for upon recognition of revenue.
 
Subscription revenue is generated from businesses that pay MobileBits a subscriber fee for each SAMY mobile subscriber. Each mobile subscription generates a monthly fee beginning when a mobile customer subscribes to a specific branded storefront within the SAMY application. Subscription fees are charged for the length of time a SAMY shopper remains subscribed to branded storefront. Each SAMY shopper can subscribe to more than one branded storefronts within the SAMY application. Average revenue per user is determined by multiplying the subscription fee by the number of individual storefronts a SAMY shopper subscribes to.
 
Cost of License, Maintenance, and Hosting Revenues
 
Cost of license revenue is primarily comprised of the license-based royalties to third parties and production and distribution costs for initial product licenses.
 
Cost of maintenance revenue is primarily comprised of the costs associated with the customer support personnel that provide maintenance, enhancement and support services to our customers.
 
Hosting fees are directly related to each client’s hosting requirements and charged by a third party service provider.
 
Sales Commissions
 
We pay commissions, including sales bonuses, to our direct sales force related to revenue transactions under sales compensation plans established annually. We defer the portion of commissions that are direct and incremental costs of the license and maintenance revenue arrangements and recognize them as selling and marketing expenses in the statements of operations over the terms of the related customer contracts in proportion to the recognition of the associated revenue. The commission payments are typically paid in full in the month or quarter following execution of the customer contracts.
 
 
12

 
 
Share-Based Payments
 
The Company estimates the fair value of each stock option or warrant award at the grant date by using the Black-Scholes option pricing model and common shares based on the last applicable market price of the Company’s common stock on the date of the share grant. The fair value determined represents the cost for the award and is recognized over the vesting period during which an employee or service provider is required to provide service in exchange for the award. As share-based compensation expense is recognized based on awards ultimately expected to vest, the Company reduces the expense for estimated forfeitures based on historical forfeiture rates. Previously recognized compensation costs may be adjusted to reflect the actual forfeiture rate for the entire award at the end of the vesting period. Excess tax benefits, if any, are recognized as an addition to paid-in capital.
 
Earnings (Loss) per Share
 
Basic earnings per share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. EPS excludes all potential dilutive shares of common stock if their effect is anti-dilutive. As of January 31, 2013 and 2012 the Company excluded 24,904,475 units and 37,061,984 units of stock options and warrants outstanding, respectively, since there inclusion would be anti-dilutive.
 
Foreign Currency Translation
 
The functional currency of Aixum is the Swiss Franc (“CHF”). Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income (loss) for the respective periods.
 
For financial reporting purposes, the financial statements of Aixum are translated into the Company’s reporting currency, United States Dollars (“USD”). Asset and liability accounts are translated using the closing exchange rate in effect at the balance sheet date, equity account and dividend are translated using historical exchange rates and income and expense accounts are translated using the average exchange rate prevailing during the reporting period.
 
Adjustments resulting from the translation, if any, are included in accumulated other comprehensive income (loss) in stockholder’s equity.
 
Subsequent Events
 
The Company has evaluated all transactions through the filing date of this Form 10-Q for subsequent event disclosure consideration.
 
Recent Accounting Pronouncements

The Company does not expect that any recently issued accounting pronouncements will have a significant impact on the results of operations, financial position, or cash flows of the Company.
 
NOTE 3 – GOING CONCERN
 
As reflected in the accompanying consolidated financial statements, the Company has suffered recurring losses from operations. The Company has a net loss of $1,924,377, a working capital deficit of $1,672,178 and net cash used in operations of $756,315 for the three months ended January 31, 2013; and an accumulated deficit of $18,096,073 at January 31, 2013.  In addition, the Company has not completed its efforts to establish a stable recurring source of revenues sufficient to cover its operating costs for the next twelve months. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
 
The ability of the Company to continue its operations is dependent on the successful execution of management's plans, which include the expectation of raising debt or equity based capital, with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements.  The Company may need to issue additional equity and incur additional liabilities with related parties to sustain the Company’s existence although no commitments for funding have been made and no assurance can be made that such commitments will be available.
 
 
13

 
 
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  These financial statements do not include any adjustments relating to the recovery of assets or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
 
In response to these factors, the management intends to take on the following actions:
 
seek additional funding from private placement and public offerings,
seek additional funding from third party debt financings; and
continue the implementation of the business plan, which may include merging or acquiring with an operating entity.
 
NOTE 4 – ACQUISITIONS

Acquisition of Pringo, Inc.
 
On December 6, 2011, the Company completed a merger with Pringo, Inc. Pursuant to the Merger Agreement, each share of common stock of Pringo issued and outstanding immediately prior to the effective time, was converted into the right to receive a number of shares of common stock of the Company such that immediately after the Merger,  Pringo’s stockholders, and the holders of Pringo’s outstanding options and warrants, own fifty percent (50%) of the Company's then outstanding shares of common stock on a fully diluted basis (as if all of Pringo’s and the Company’s options and warrants were exercised), and the Company’s stockholders, and holders of the Company’s outstanding options and warrants, own fifty percent (50%) of its then outstanding shares of the Company's common stock on a fully diluted basis (as if all of Pringo’s and the Company’s options and warrants were exercised). These shares and options were valued at their grant date value of $14,726,772 and $ 4,017,749, respectively, for a total purchase price of $18,744,521. At the closing of the Pringo Merger, Pringo’s stockholders immediately prior to the Pringo Merger were issued 29,453,544 shares of the Company’s common stock.
 
All shares of Pringo common stock outstanding immediately prior to the Pringo Merger are no longer outstanding and were automatically cancelled and retired, and each certificate previously representing any such shares now represents the right to receive a certificate representing the shares of the Company common stock into which such Pringo common stock was converted into the Pringo Merger.  All the issued and outstanding options to purchase common stock of Pringo prior to the Pringo Merger were vested and converted into options to purchase the Company’s common stock.  At the closing, options to purchase 7,091,500 shares of the Company's common stock were issued to replace the options to purchase Pringo's common stock.
 
Pringo is a Delaware “C” Corporation headquartered in Los Angeles, California. Established in 2006, Pringo offers software products that combine multi-lingual enterprise-class portals, content management systems, social collaboration features, and user management tools in various open-source packages.
 
Under the acquisition method of accounting, the total estimated purchase price is allocated to Pringo’s tangible and intangible assets and liabilities based on their estimated fair values at the date of the completion of the acquisition (December 6, 2011).
 
The following table summarizes the final allocation of the purchase price:
 
Current assets
 
$
185,875
 
Property and equipment
   
17,140
 
Domain name
   
20,100
 
Intangible assets
   
3,780,000
 
Current liabilities
   
(631,963
)
Long-term liabilities
   
(191,000
)
Goodwill
   
15,564,369
 
Purchase price
 
$
18,744,521
 
 
 
14

 
 
Goodwill and intangible assets:
 
The purchase price and costs associated with the acquisition exceeded the net assets acquired by $19,344,369 on December 6, 2011, of which $3,780,000 was allocated to acquire technology and other intangible assets, such as customer relationships, and the remaining $15,564,369 was assigned to goodwill. 
 
Acquisition of Aixum Tec AG
 
On September 28, 2012, the Company completed a share exchange with Aixum Tec AG, a Liechtenstein Company (“Aixum”), pursuant to a Stock Exchange Agreement (the “Stock Exchange Agreement”), dated May 21, 2012 (the “Stock Exchange”). As a result of the Stock Exchange, Aixum is a wholly-owned subsidiary of MobileBits.
 
Pursuant to the Stock Exchange Agreement, at the closing of the Stock Exchange each seller (a “seller”, and collectively, the “Sellers”) sold to the Company its shares of Aixum (the “Transferred Shares”). In consideration for the Transferred Shares, the Company issued to each Seller such seller’s pro rata portion of a number of shares of the Common Stock, par value $0.001 per share, of the Company, equal to (A) 6,666,667 minus (B) the sum of (i) the Liability Shares (as defined in the Stock Exchange Agreement), if any, plus (ii) the Cost Shares (as defined in the Stock Exchange Agreement), if any. On the Closing Date, MobileBits issued an aggregate of 5,803,061 of its Common Stock to the Sellers valued at $2,901,531.
 
Prior to the acquisition, the Company executed a promissory note between Aixum and MobileBits dated March 7, 2012 providing for MobileBits to lend up to 110,000 CHF (approximately $114,800) at 5% interest rate payable on September 13, 2012.  On June 19, 2012, the Company entered an amendment to increase the principal amount to 180,000 CHF (approximately $183,929). As of January 31, 2013, 170,000 CHF (approximately $185,165) had been advanced to Aixum by MobileBits. This amount has been eliminated in consolidation.   
 
The following table summarizes the preliminary allocation of the purchase price:
 
Current assets
 
$
65,000
 
Property and equipment
   
9,000
 
Intangible assets
   
3,110,000
 
Current liabilities
   
(514,000
)
Goodwill
   
543,000
 
Purchase price
 
$
3,213,000
 
 
Assets acquired and liabilities assumed are recognized based on an estimate of their fair value as of the acquisition date. The estimated fair values were determined based on management’s best estimates at the time of this filing. Estimates and assumptions are subject to change upon management’s review of the final amounts. Any deferred taxes or deferred tax liabilities will be recognized upon the completion of these valuations, if applicable. This final evaluation of net assets acquired is expected to be completed as soon as a final accounting is performed but no later than one year from the acquisition date. Any future changes in the value of the net assets acquired will be offset by a corresponding change in goodwill.
 
Goodwill and intangible assets:
 
The purchase price and costs associated with the acquisition in excess of the net liabilities assumed was $3,653,000 on September 28, 2012, of which $3,110,000 was allocated to acquire technology and other intangible assets such as customer relationships and the remaining $543,000 was assigned to goodwill.
 
 
15

 
 
NOTE 5 – PROPERTY AND EQUIPMENT

The following is a summary of the Company’s property and equipment at January 31, 2013 and October 31, 2012:
 
   
Estimated
   
January 31,
   
October 31,
 
   
Useful Lives
   
2012
   
2012
 
Furniture and fixtures
   
5
   
$
8,249
   
$
8,249
 
Equipment
   
5
     
34,064
     
34,064
 
Website and database
   
3
     
31,602
     
26,602
 
Effect of exchange rate changes
           
(44
)       -  
Subtotal
           
73,871
     
68,915
 
Less:  accumulated depreciation
           
(34,819
)    
(28,157
)
Property and equipment, net
         
$
39,052
   
$
40,758
 

For the three months ended January 31, 2013 and 2012, total depreciation expense was $6,662 and $6,406, respectively.
 
NOTE 6 – SOFTWARE DEVELOPMENT COSTS

The following is a summary of the Company’s software development costs at January 31, 2013 and October 31, 2012:

   
January 31,
   
October 31,
 
   
2013
   
2012
 
Software development costs incurred
  $ 310,189     $ 208,107  
Effect of exchange rate changes
    9,722       -  
Subtotal
    319,911       208,107  
Less: accumulated amortization
    (74,435 )     (48,374 )
Software development costs, net
  $ 245,476     $ 159,733  
 
For the three months ended January 31, 2013 and 2012, total amortization expense was $26,061 and $40,769, respectively.
 
NOTE 7 – INTANGIBLE ASSETS

The following is a summary of the Company’s intangible assets at January 31, 2013 and October 31, 2012:

 
Estimated
Useful Lives
 
January 31,
2013
   
October 31,
2012
 
Domain name
Indefinite
 
$
20,100
   
$
20,100
 
Developed technology - software
3
   
3,780,000
     
3,780,000
 
Customer relationships
5
   
1,700,000
     
1,700,000
 
Trade name
10
   
1,410,000
     
1,410,000
 
Subtotal
     
6,910,100
     
6,910,100
 
Less:  accumulated amortization
     
(1,324,764
)    
(889,459
)
Intangible assets, net
   
$
5,585,336
   
$
6,020,641
 

For the three months ended January 31, 2013 and 2012, the Company recognized amortization expense of $435,305 and $117,542, respectively.
 
 
16

 
 
NOTE 8 – NOTES PAYABLE – RELATED PARTY
 
The Company assumed a related party promissory note in the amount of $110,000 in the Pringo Merger, accruing interest at 10% per annum. On February 1, 2012, the note was extended through June 30, 2012 with the full balance of the $110,000 to be repaid by June 30, 2012.  The balance on the note as of January 31, 2013 was $58,000. The parties are in the process of negotiating new payment terms.
 
In addition, on December 22, 2011 the Company converted an $81,000 related party note payable and accrued interest of $23,288 by issuing 610,319 shares of common stock valued at $305,160. The value in excess of the principal in the amount of $200,872 was recorded as additional interest expense. The Company is currently contesting the original terms of the common stock conversion.

NOTE 10 – RELATED PARTY TRANSACTIONS

As of January 31, 2013, the Company had outstanding payables to related parties of the Company in the amount of $620,596. $228,000 was owed to The Abai Group, Inc. for the services performed and $29,501 to Majid Abai for accrued severance benefits; $189,380 was owed to Walter Kostiuk primarily for commissions on sale of the Company’s common stock, unpaid salary and a $25,000 bonus accrual pursuant to his employment agreement and $173,715 was owed to Andrew Marshall for unpaid salary and expenses. During the  the three months ended January 31, 2012, the Company paid Walter Kostiuk $20,000 primarily related to salary owed.
 
In connection with the Pringo Merger, 3,000,000 shares owned by Walter Kostiuk were cancelled after the issuance of 29,453,544 shares issued to Pringo, Inc. shareholders on December 6, 2012.

NOTE 11 – COMMITMENTS AND CONTINGENCIES

As the result of the Pringo Merger, the Company moved its principal office to 11835 W. Olympic Boulevard, Suite 855 Los Angeles, California. The rent for this location was $3,128 per month through February 2012. After March 2012, the rent increased to $3,378 per month. The lease expires as of March 31, 2013.
 
The Company is also maintaining an office in Sarasota, Florida located at 5901 N. Honere Ave.  The rent for three months was $1,175 per month for the period January 1, 2011 through March 31, 2011. On April 1, 2011, the Company expanded its space and renewed its lease for a twelve-month period for $1,192 per month. On March 1, 2012, the Company entered into a twelve-month lease for $3,875 per month.
 
As a result of the Aixum share exchange, the Company maintains office at Landstrasse 123, 9495 Triesen, Liechtenstein. In June of 2010, Aixum signed a new three year lease agreement with its landlord with rent of $2,319 per month for the first 12 months, $2,967 per month for the second 12 months, and $3,566 per month for the last 12 months of the lease.
 
Birlasoft, Inc., v. Pringo Networks LLC
 
On or about September 21, 2009, Birlasoft, Inc. filed a civil action in Superior Court of New Jersey, Middlesex County seeking damages in relation to Pringo Networks, LLC’s, the Company’s predecessor, alleged breach of contract.  The claims asserted by Birlasoft, Inc. were disputed and after an initial attempt to settle the case, the Company did not respond to the lawsuit, which resulted in a default judgment in the amount of approximately $59,000 in 2010.  On March 21, 2012, the lawsuit was settled in the amount of $22,000 for all amounts due including the previously accrued judgment of $59,000 and accounts payable of $44,817 resulting in a gain of $81,817. The $22,000 is to be paid with an initial amount of $4,000 being paid within five (5) days after the execution of the settlement and $2,000 payments on the first business day of each month, for nine (9) months, starting on April 1, 2012.  The settlement amount was paid in full as of December 1, 2012.
 
 
17

 
 
Majid Abai v. MobileBits
 
Majid Abai, the former CEO of MobileBits Holdings Corporation, MobileBits Corporation and Pringo, Inc. (collectively the “MobileBits Companies”), entered into a written agreement which Mr. Abai alleges requires the MobileBits Companies to pay him severance compensation, reimburse certain of his expenses and furnish other consideration totaling $141,199 which includes $7,450 the Company is contesting. On or about October 3, 2012 Mr. Abai filed action against the MobileBits Companies in the Superior Court of the State of California, West District, alleging that the MobileBits companies breached this agreement.  Mr. Abai seeks damages and/or restitution.  As of January 31, 2013, $104,248 has been paid against the amounts owed and $29,501 was unpaid and accrued. The Company is currently negotiating with Mr. Abai to resolve this issue. 
 
NOTE 12 – STOCK PAYABLE

During the three month period ended January 31, 2013, the Company received $563,000 in funds from investors for which stock certificates had not been issued. Of this amount, MRL Trade S.r.l. (“MRL”) invested $450,000 and the remaining $113,000 were funds contributed by private investors.
 
MRL signed a Share Purchase Agreement (“Agreement”) on December 4, 2012 to purchase 2,200,000 shares of MobileBits common stock at $0.50 per share for a total investment of $1,100,000.  The initial payment of $550,000 was to be made within 10 days from receipt of the signed Agreement which was December 24, 2012 and the remaining $550,000 was to be made within 60 days of the initial payment.  As of January 31, 2013, $550,000 has been received. MRL also signed a 10 year Exclusive Referral Agreement (“Referral Agreement”) with the Company. The Referral Agreement provides MRL the exclusive right to receive 50% of the gross revenues generated from the SAMY software in the territory of Italy.  MobileBits is responsible for the setup and development of the SAMY mobile application, merchant web-application to support the Italian market, including language conversion, training, documentation, marketing materials, SAMY website and the sales/support teams.

As of October 31, 2012, the Company had a stock payable balance of $122,000 for which the corresponding share certificates were issued as of January 31, 2013.
 
NOTE 13 – STOCKHOLDERS’ EQUITY
 
The Company recorded amortization of share-based compensation of $759,913 for the three months ended January 31, 2013 for options granted prior to October 31, 2012 as no options or warrants were issued during the three months ended January 31, 2013.

During the three months ended January 31, 2013, the Company issued 244,000  shares of common stock for $122,000 for funds that were received as of October 31, 2012 and 428,000 shares of common stock for $214,000 of cash received during the three months ended January 31, 2013.  

The Company recorded amortization of share-based compensation of $4,601,101 for the three months ended January 31, 2012 for the options granted during the three months ended January 31, 2012 and prior to October 31, 2011. All Pringo’s options were fully vested on the date of Pringo Merger.
 
During the three months ended January 31, 2012, the Company received net proceeds of $237,000 from various investors for the sale of 514,000 shares of its common stock. 
 
On December 22, 2011, the Company issued 610,319 shares of common stock for a note payable in the amount of $81,000.  The value of the shares in excess of the principal $200,872 was recorded as interest expense.

On December 6, 2011, the Company issued 29,453,544 shares of common stock valued at $0.50 per share to Pringo, Inc. shareholders in connection with the Pringo Merger. In connection with the Pringo Merger, Walter Kostiuk, returned 3,000,000 shares for cancellation after the issuance of 29,453,544 shares issued to Pringo, Inc. shareholders. All Pringo’s options were fully vested on the date of the Pringo Merger.
 
NOTE 14 – STOCK OPTION AND WARRANT ACTIVITIES
 
The Company did not issue any option or warrants during the three months ending January 31, 2013. 
 
The following is a summary of stock option and warrant activities for the three months ended January 31, 2013:

   
Shares
   
Weighted Average Exercise Price
   
Weighted Average Remaining Contractual Term (in years)
   
Aggregate Intrinsic Value
 
Outstanding, October 31, 2012
   
24,929,475
   
$
0.45
     
6.12
   
$
12,647,130
 
Granted
                               
Exercised
                               
Forfeited
   
(25,000
)    
0.00
                 
Expired
                               
Outstanding, January 31, 2013
   
24,904,475
   
0.49
     
5.87
   
$
10,325,137
 
Exercisable, January 31, 2013
   
14,751,192
                         
 
 
18

 
 
The Company recorded option and warrant expense of $759,913 and $4,601,101 for the options and warrants vested during the three months ended January 31, 2013 and 2012, respectively.
 
The following is a summary of outstanding stock options at January 31, 2013:

 
Number of Common
Stock Equivalents Options/Warrants
 
 Expiration Date
   
Remaining Contracted
Life (Years)
     
Exercise Price
     
Weighted Average
Remaining
Contracted Life
 (Years)
 
 
208,335
 
01/21/2015
   
1.97
   
$
0.50
     
0.0165
 
 
420,681
 
06/27/2016
   
3.41
   
$
0.75
     
0.0575
 
 
62,499
 
10/31/2016
   
3.75
   
$
0.50
     
0.0094
 
 
250,000
 
11/01/2016
   
3.75
   
$
0.51
     
0.0377
 
 
300,000
 
04/17/2017
   
4.21
   
$
0.51
     
0.0507
 
 
300,000
 
08/21/2017
   
4.56
   
$
1.00
     
0.0549
 
 
3,250,170
 
05/31/2018
   
5.33
   
$
0.19
     
0.6958
 
 
1,000,000
 
08/15/2018
   
5.54
   
$
0.51
     
0.2224
 
 
25,000
 
09/05/2018
   
5.60
   
$
0.51
     
0.0056
 
 
187,790
 
09/20/2018
   
5.64
   
$
0.19
     
0.0425
 
 
250,000
 
10/31/2018
   
5.75
   
$
0.51
     
0.0577
 
 
100,000
 
11/13/2018
   
5.79
   
$
0.51
     
0.0232
 
 
11,750,000
 
12/01/2018
   
5.84
   
$
0.50
     
2.7533
 
 
1,000,000
 
12/05/2018
   
5.85
   
$
0.51
     
0.2348
 
 
125,000
 
01/01/2019
   
5.92
   
$
0.51
     
0.0297
 
 
50,000
 
02/12/2019
   
6.04
   
$
0.51
     
0.0121
 
 
3,000,000
 
04/30/2019
   
6.25
   
$
0.51
     
0.7525
 
 
25,000
 
07/01/2019
   
6.42
   
$
0.51
     
0.0064
 
 
50,000
 
08/31/2019
   
6.58
   
$
0.51
     
0.0132
 
 
1,250,000
 
09/30/2019
   
6.67
   
$
0.51
     
0.3346
 
 
1,000,000
 
04/30/2020
   
7.25
   
$
1.00
     
0.2911
 
 
300,000
 
12/05/2026
   
13.85
   
$
0.51
     
0.1669
 
 
24,904,475
                       
5.8685
 

All options issued and outstanding are being amortized over their respective vesting periods. The unrecognized compensation expense at January 31, 2013 was $5,072,767.

NOTE 15 – SUBSEQUENT EVENTS

As of March 22, 2013, the Company has received cash proceeds of $465,000 subsequent to January 31, 2013 to purchase common stock including $450,000 from MRL.
 
The corresponding shares have not been issued as of March 22, 2013.
 
 
19

 

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

The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

Plan of Operation

MobileBits Holdings Corporation, formerly Bellmore Corporation (“BC”) was incorporated in the State of Nevada on July 22, 2008.  On January 25, 2010, BC changed its name to MobileBits Holdings Corporation (the “Company” or “MB). Today, MobileBits is a globally focused direct mobile marketing and loyalty software supplier. The Company offers businesses a mobile marketing and loyalty network called SAMY that enables merchants, retailers or brands to connect with consumers in their local area through their mobile devices.  The solution provides businesses a complete set of cloud based tools to connect with, create and manage mobile campaigns, deals, offers, loyalty, social media, commerce and rewards to a subscribed consumer through a mobile application called SAMY. To consumers, SAMY provides a single “Mobile Mall” application and experience where a shopper can quickly and easily view and be alerted of special offers, purchase products or services, earn rewards, obtain local information and seamlessly integrate their loyalty cards with their mobile devices.
 
SAMY extends the same optimal shopping experience of a mall or shopping center into a digital, “Mobile Mall.  SAMY provides consumers with a single application to connect with any number of their favorite stores, view offers, receive and store coupons, receive promotions and earn rewards.  Mobile consumers collect and gather their favorite restaurants, stores, retailers, deals, loyalty programs and more right on their smartphone; resulting in a personalized shopping experience.
 
MobileBits began development of its product in 2009 in the area of mobile content delivery with the goal to create a platform connecting consumers and marketers around relevant information on mobile devices. On December 6, 2011 we merged with Pringo Inc., through MB Pringo Merger Sub, Inc., a Delaware corporation and our wholly-owned subsidiary (“Merger Sub”), completed a merger with Pringo, Inc. a Delaware corporation (“Pringo”), pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated June 23, 2011 (the “Pringo Merger”). Pringo, based in Los Angeles California brought the Company a full development platform called Pringo Connect, in development since 2006, as well as a new product development team. Pringo's business focus was licensing software and selling professional services to enterprises looking to create a socially integrated website.

On September 28, 2012, the Company also completed a share exchange with Aixum Tec AG, a Liechtenstein Company (“Aixum”) operating in Switzerland, pursuant to a Stock Exchange Agreement (the “Stock Exchange Agreement”), dated May 21, 2012 (the “Stock Exchange”). Aixum Tec AG, a European based organization focused on a merchant and consumer application platform called SAMY4ME which provided an easy to use software interface for both businesses and consumers connecting around loyalty card integration and offers.

In 2012, MobileBits completed the integration of Pringo Connect and the SAMY4ME platforms, re-branding the name to SAMY and re-focused the Company to offer businesses a mobile direct marketing network focusing on delivering a network that provides similar perceived value to today's shopping centers and malls.

SAMY now provides a complete set of cloud based tools to connect with, create and manage mobile campaigns, deals, offers, loyalty and rewards to a subscribed mobile consumer. To businesses, SAMY provides a single self-serve mobile marketing & loyalty platform that enables businesses to create, design and publish their offers, coupons, promotions, loyalty cards and gift cards to a mobile storefront. To consumers, SAMY provides a single “Mobile Mall” application and experience where a shopper can quickly and easily view branded storefronts and be alerted of special offers, purchase products or services, earn rewards, obtain local information and seamlessly integrate their loyalty cards with their mobile devices.

For larger deployments MobileBits offers the Pringo Connect platform under the brand SAMY Enterprise.
 
 
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Summary of Acquisition Transactions
 
MobileBits Holdings Corporation, formerly Bellmore Corporation (“BC”) was incorporated in the State of Nevada on July 22, 2008.  On January 25, 2010, BC changed its name to MobileBits Holdings Corporation (the “Company”, “MobileBits” or “MB”).
 
MobileBits Corporation (“MBC”) was incorporated in Florida on March 2009. The business was founded with the intention of providing a platform that connected marketers to consumers around meaningful content available on mobile devices.

The Company entered into a Share Exchange Agreement, dated March 12, 2010 (the “ Share Exchange Agreement”) between MBC and the shareholders of MBC (the “MBC Shareholders”) pursuant to which MB acquired MBC, an early stage software development firm targeting its software at the mobile search market.
 
The transaction closed on March 12, 2010 and MB acquired 100% of the outstanding shares of common stock of MBC (the “MBC Stock”) from the MBC Shareholders. In exchange for MBC common stock and $275,000, MB issued 18,752,377 shares of its common stock to the MBC Shareholders, which represented approximately 87.9% of MB’s issued and outstanding common stock.  Upon closing, MBC became a 100% wholly-owned subsidiary of the Company.   
 
On December 6, 2011, we, through MB Pringo Merger Sub, Inc., a Delaware corporation and our wholly-owned subsidiary (“Merger Sub”), completed a merger with Pringo, Inc. a Delaware corporation (“Pringo”), pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated June 23, 2011 (the “Pringo Merger”). As a result of the Merger, Merger Sub merged with and into Pringo, with Pringo surviving the Merger as our wholly owned subsidiary. 
 
Pursuant to the Merger Agreement, each share of common stock of Pringo issued and outstanding immediately prior to the effective time, was converted into the right to receive a number of shares of our common stock such that immediately after the Merger,  Pringo’s stockholders, and the holders of Pringo’s outstanding options and warrants, owned fifty percent (50%) of our then outstanding shares of common stock on a fully diluted basis (as if all of Pringo’s and Parent’s options and warrants were exercised), and our stockholders, and holders of our outstanding options and warrants, owned fifty percent (50%) of its then outstanding shares of our common stock on a fully diluted basis (as if all of Pringo’s and our options and warrants were exercised).  At the closing of the Pringo Merger on December 6, 2011, Pringo’s stockholders immediately prior to the Pringo Merger were issued 29,453,544 shares of common stock of Parent.
 
Pringo is a Delaware “C” Corporation headquartered in Los Angeles, California. Established in 2006, Pringo offers software products that combine enterprise-class portals, content management systems, social collaboration features, extensive API and extension capabilities and user management tools in various open-source packages. Pringo distinguishes itself from other products of the same class in the market in four distinct areas: Pringo products are offered in an open-architecture format; available in 23 languages; Pringo products are easily integrated and easily deployed by enterprises; and Pringo offers over 400 customizable features.  
 
On September 28, 2012, the Company completed a share exchange with Aixum Tec AG, a Liechtenstein Company (“Aixum”), pursuant to a Stock Exchange Agreement (the “Stock Exchange Agreement”), dated May 21, 2012 (the “Stock Exchange”). As a result of the Stock Exchange Aixum is a wholly-owned subsidiary of MobileBits.
 
Pursuant to the Stock Exchange Agreement, at the closing of the Stock Exchange each seller (a “seller”, and collectively, the “Sellers”) sold to the Company its shares of Aixum (the “Transferred Shares”). In consideration for the Transferred Shares, the Company issued to each Seller such seller’s pro rata portion of a number of shares of the Common Stock, par value $0.001 per share, of the Company, equal to (A) 6,666,667 minus (B) the sum of (i) the Liability Shares (as defined in the Stock Exchange Agreement), if any, plus (ii) the Cost Shares (as defined in the Stock Exchange Agreement), if any. On the Closing Date, MobileBits issued an aggregate of 5,803,061 of its Common Stock to the Sellers.
 
During the year we successfully integrated the Pringo Connect and SAMY4ME platforms and transitioned the Company from enterprise license and services sales and support to subscription based business model. In addition we launched the newly branded SAMY product.
 
 
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Over the next twelve months, we intend to continue growing our business by expanding the availability and distribution of the SAMY network into other markets and regions. We also plan to offer SAMY under license to certain qualified re-sellers.
 
MB currently anticipates the implementation of its business plan will require additional investment capital. The Company hopes to raise up to $10 million in equity financing in 2013.  If we are successful in raising the necessary funds, we will use those funds to grow our consumer network and to acquire new customers through increased advertising, sales, and marketing product fulfillment, to fund product development providing additional product functionality, to provide working capital for strategic acquisitions and for other corporate purposes.
 
Results of Operation

Three Months Ended January 31, 2013 compared to the Three Months Ended January 31, 2012

Revenues

Our revenues were $157,979 for the three months ended January 31, 2013 compared to $74,880 for the three months ended January 31, 2012. We started to generate revenues from enterprise licenses and services after we acquired Pringo. Our revenues come from the existing and new Pringo contracts as well as SAMY merchant subscription fees. For the three months ended January 31, 2013, license fees, professional service fees, hosting fees and SAMY merchant subscription fees totaled $48,328, $86,121, $1,000 and $22,530 respectively.  As the Company acquired Aixum on September 28, 2012, there were no SAMY merchant subscription fees in the three month period ended January 31, 2012.

Cost of Revenues

Our cost of revenues was $25,629 for the three months ended January 31, 2013 compared to $22,491 for the three months ended January 31, 2012. Cost of revenues is incurred on the revenues generated from Pringo contracts. For the three month period ended January 31, 2013, costs associated with professional service fees were $14,996 and costs for hosting costs for both Pringo and Samy were $10,633.

Selling, General and Administrative Expenses

Our total general and administration expenses were $1,596,678 for the three months ended January 31, 2013 compared to $5,221,848 for the comparable three month period ended January 31, 2012.  The decrease of $3,625,170 is primarily attributable to a decrease of $3,841,188 in non-cash stock compensation expense; lower bad debt expense of $44,693 in 2013; offset by $172,126 in increased wages related to new hires and additional employees from acquisitions and  $39,996  in higher marketing expenses.

Depreciation and Amortization

Depreciation and amortization was $468,028 for the three months ended January 31, 2013 compared to $164,717 for the three months ended January 31, 2012. The increase is primarily due to the amortization related to additional intangible assets acquired in the Aixum Stock Exchange and a full three months amortization in 2013 related to the Pringo acquisition.

Interest Expense, net

Interest expense was $3,110 for the three months ended January 31, 2013 compared to $229,057 for the three months ended January 31, 2012. In connection with the conversion of a note payable into the Company’s common stock, $200,872 representing the value in excess of the note payable’s principal, was recorded as interest expense during the three months ended January 31, 2012.
 
Unrealized foreign currency exchange loss
 
During the three months ended January 31, 2013, the Company incurred an unrealized foreign exchange gain of $11,089 related to transactions with Aixum.
 
 
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Liquidity and Capital Resources

As reflected in the accompanying consolidated financial statements, the Company has suffered recurring losses from operations. The Company has a net loss of $1,924,377, a working capital deficit of $1,672,178 and net cash used in operations of  $756,315 for the three months ended January 31, 2013; and an accumulated deficit of $18,096,073  at January 31, 2013.  In addition, the Company has not completed its efforts to establish a stable recurring source of revenues sufficient to cover its operating costs for the next twelve months. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
 
The ability of the Company to continue its operations is dependent on the successful execution of management's plans, which include the expectation of raising debt or equity based capital, with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements.  The Company may need to issue additional equity and incur additional liabilities with related parties to sustain the Company’s existence although no commitments for funding have been made and no assurance can be made that such commitments will be available.
 
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  These financial statements do not include any adjustments relating to the recovery of assets or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
 
In response to these factors, the management intends to take on the following actions:
 
seek additional funding from private placement and public offerings,
seek additional funding from third party debt financings; and
continue the implementation of the business plan, which may include merging or acquiring with an operating entity.
 
Cash flows from operating activities
 
Cash used in operating activities for the three months ended January 31, 2013 and 2012 was $756,315 and $535,587, respectively. The increase is primarily due to increased salary costs and professional fees.
 
Cash flows from investing activities
 
Cash used in investing activities for the three months ended January 31, 2013 and 2012 was $107,082 and $35,856, respectively. The increase is due to money spent on software development.                  .

Cash flows from financing activities

Cash provided by financing activities for the three months ended January 31, 2013 and 2012 was $784,250 and $237,000, respectively. The cash provided by financing for both periods were due to us completing approximately $0.8 million and $0.2 million of private placements, respectively.

Critical Accounting Policies

Use of Estimates
 
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from estimates. 
 
 
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Significant estimates made by the Company in 2013 and 2012 included: 1)  100% valuation allowance for deferred taxes due to the Company’s continuing and expected future losses; 2) inputs used in its option-pricing model to calculate the Company share-based compensation arrangements; 3) allowance estimated for doubtful accounts; 4) assumptions used in the valuation models to calculate the fair values of assets acquired and liabilities assumed under acquisitions; and 5) assumptions used in the projections and discounted cash flows analysis to assess the goodwill impairment.
 
Software Development Costs

Costs of software developed internally for licensing to third parties are expensed until the technological feasibility of the software product has been established. Thereafter, software development costs incurred through the general release of the software products are capitalized and subsequently reported at the lower of unamortized cost or net realizable value. Capitalized software development costs are amortized on a straight-line basis over the products’ respective estimated economic lives, which are typically three years. The amortization of capitalized software development costs, including any amounts accelerated for products that are not expected to generate sufficient future revenue to realize their carrying values, is included in depreciation and amortization expense in the consolidated statements of operations.

Intangible Assets
 
Intangible assets consist of expenditures for a domain name, the value of trade name, customer relationships, and software, which was initially recorded at the fair value on the acquisition date of Aixum and Pringo. The domain name has an estimated indefinite life, is not subject to amortization, but is reviewed annually for impairment. The identifiable intangibles are amortized over their useful lives of 3 to 10 years and are reviewed annually for impairment.
 
Goodwill
 
Costs of investments in excess of the underlying fair value of net assets at the date of acquisition are recorded as goodwill and assessed annually for impairment. The carrying amount of goodwill is not amortized, but we perform an annual assessment of goodwill for impairment by first comparing the book value of net assets to the fair value of the reporting units.  If the fair value is determined to be less than the book value or qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value.

Revenue Recognition

License revenue consists principally of revenue earned under software license agreements. License revenue is generally recognized when a signed contract or other persuasive evidence of an arrangement exists, the software has been electronically delivered, the license fee is fixed or is measured on a paid user basis; and collection of the resulting receivable is probable. When contracts contain multiple elements wherein Vendor-Specific Objective Evidence (“VSOE”) exists for all undelivered elements, we account for the delivered elements in accordance with the “Residual Method.” VSOE of fair value for maintenance and support is established by a stated renewal rate, if substantive, included in the license arrangement or rates charged in stand-alone sales of maintenance and support. Revenue from subscription license agreements, which include software, rights to unspecified future products and maintenance, is recognized ratably over the term of the subscription period.
 
Provided all other revenue criteria are met, the upfront, minimum, non-refundable license fees from customers are generally recognized upon delivery and on-going royalty fees are generally recognized upon reports of new licenses issued. Revenue on sales to resellers is recognized when evidence of an end user arrangement exists and recorded net of related costs to the resellers.
 
 
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Professional services revenue consists primarily of revenue received for assisting with the customization and implementation of our software, on-site support, and other consulting services. Many customers who license our software also enter into separate professional services arrangements with us. We always account for professional services separately from license revenue as professional services are considered essential to the functionality of the software based on the nature of our software products. Substantially all of our professional services arrangements that are billed on a time and materials basis are recognized as the services are performed. Contracts with fixed or not-to-exceed fees are recognized on a percentage-of-completion. If there is significant uncertainty about the project completion or receipt of payment for professional services, revenue is deferred until the uncertainty is sufficiently resolved. VSOE of fair value of consulting services is based upon stand-alone sales of those services. Payments received in advance of consulting services performed are deferred and recognized when the related services are performed. Work performed and expenses incurred in advance of invoicing are recorded as unbilled receivables. These amounts are billed in the subsequent month.
 
Maintenance revenue consists of fees for providing software updates on a when and if available basis and technical support for software products (“post-contract customer support” or “PCS”). Maintenance revenue is recognized ratably over the term of the agreement.
 
Hosting revenues are recognized in the month services are delivered.
 
Payments received in advance of services performed are deferred. Allowances for estimated future returns and discounts are provided for upon recognition of revenue.
 
Subscription revenue is generated from businesses that pay MobileBits a subscriber fee for each SAMY mobile subscriber. Each mobile subscription generates a monthly fee beginning when a mobile customer subscribes to a specific branded storefront within the SAMY application. Subscription fees are charged for the length of time a SAMY shopper remains subscribed to branded storefront. Each SAMY shopper can subscribe to more than one branded storefronts within the SAMY application. Average revenue per user is determined by multiplying the subscription fee by the number of individual storefronts a SAMY shopper subscribes to.

Share-Based Payments

The Company estimates the fair value of each stock option or warrant award at the grant date by using the Black-Scholes option pricing model and common shares based on the last applicable market price of the Company’s common stock on the date of the share grant. The fair value determined represents the cost for the award and is recognized over the vesting period during which an employee or service provider is required to provide service in exchange for the award. As share-based compensation expense is recognized based on awards ultimately expected to vest, the Company reduces the expense for estimated forfeitures based on historical forfeiture rates. Previously recognized compensation costs may be adjusted to reflect the actual forfeiture rate for the entire award at the end of the vesting period. Excess tax benefits, if any, are recognized as an addition to paid-in capital.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Smaller reporting companies are not required to provide this information.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure controls and procedures.

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are not effective as of the end of the period covered, that such that the information required to be disclosed in our “SEC” reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our CEO, as appropriate to allow timely decisions regarding required disclosure. Our CEO and CFO concluded, based on the evaluation of the effectiveness of the disclosure controls and procedures, that as of January 31, 2013, our disclosure controls and procedures were not effective due to the material weaknesses described in Management's Report on Internal Control over Financial Reporting as reported in our Form 10-K for the year ended October 31, 2012.
 
Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 
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 PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Majid Abai v. MobileBits
 
Majid Abai, the former CEO of MobileBits Holdings Corporation, MobileBits Corporation and Pringo, Inc. (collectively the “MobileBits Companies”), entered into a written agreement which Mr. Abai alleges requires the MobileBits Companies to pay him severance compensation, reimburse certain of his expenses and furnish other consideration totaling $141,199 which includes $7,450 the Company is contesting. On or about October 3, 2012 Mr. Abai filed an action against the MobileBits Companies in the Superior Court of the State of California, West District, alleging that the MobileBits companies breached this agreement.  Mr. Abai seeks damages and/or restitution.  As of January 31, 2013, $104,248 has been paid against the amounts owed and $29,501 was unpaid and accrued. The Company is currently negotiating with Mr. Abai to resolve this issue. 
 
ITEM 1A. RISK FACTORS

Smaller reporting companies are not required to provide this information.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

For the three months ended January 31, 2013, the Company received net proceeds of $777,000 from various investors or the sale of its common stock.

The issuance and sale of common stock was an unregistered sale of securities issued in reliance on the exemption under Section 4(2) of the Securities Act of 1933, as amended (the “1933 Act”), and Regulation S of the Securities Act of 1933.
 
 
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

31.1
Certification of Principal Executive Officer of the Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of the Principal Financial Officer of the Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Principal Executive Officer of the Registrant pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification of Principal Financial Officer of the Registrant pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS **
XBRL Instance Document
101.SCH **
XBRL Taxonomy Schema
101.CAL **
XBRL Taxonomy Calculation Linkbase
101.DEF **
XBRL Taxonomy Definition Linkbase
101.LAB **
XBRL Taxonomy Label Linkbase
101.PRE **
XBRL Taxonomy Presentation Linkbase

** Furnished herewith. XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
In accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not filed.
 
 
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
MOBILEBITS HOLDINGS CORPORATION
   
Date: March 22, 2013
By:
Walter Kostiuk
   
Walter Kostiuk
   
President
(Duly Authorized Officer and Principal Executive Officer)
 
 
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