Attached files
Exhibit 99.1
Index
| Page | |
| Report of Independent Registered Public Accounting Firm | 1 |
| Financial Statements: | |
| Balance Sheet | 2 |
| Statement of Operations | 3 |
| Statement of Changes in Stockholders’ Equity | 4 |
| Statement of Cash Flows | 5 |
| Notes to Financial Statements | 6 |
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors
MobileBits
Corporation
(a
development stage company)
Sarasota,
Florida
We have
audited the accompanying balance sheet of MobileBits Corporation as of October
31, 2009 and the related statements of operations, changes in stockholders’
equity, and cash flows for the period from March 24, 2009 (“inception”) through
October 31, 2009. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We
conducted our audit in accordance with 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 misstatements. 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 includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of MobileBits Corporation as of
October 31, 2009, and the results of its operations and its cash flows for the
period from March 24, 2009 (inception) through October 31, 2009, in conformity
with accounting principles generally accepted in the United States of
America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company is in the development stage and has not generated a
source of recurring revenues and has experienced losses from operations since
inception, which raises substantial doubt about its ability to continue as a
going concern. Management’s plans regarding those matters are described in Note
2. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ GBH CPAs,
PC
GBH CPAs,
PC
www.gbhcpas.com
Houston,
Texas
February
8, 2010
1
MobileBits
Corporation
(A
Development Stage Company)
Balance
Sheet
As
of October 31, 2009
|
ASSETS
|
||||
|
Current
assets
|
||||
|
Cash
|
$ | 393,260 | ||
|
Prepaid
expenses
|
27,500 | |||
|
Total
current assets
|
420,760 | |||
|
Website,
net of accumulated amortization of $274
|
9,605 | |||
|
TOTAL
ASSETS
|
$ | 430,365 | ||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||
|
Current
liabilities
|
||||
|
Accounts
payable and accrued expenses
|
$ | 125,737 | ||
|
Accounts
payable and accrued expenses - related party
|
76,758 | |||
|
Total
current liabilities
|
202,495 | |||
|
Commitments
and contingencies
|
- | |||
|
Stockholders'
equity
|
||||
|
Common
stock, $0.0001 par value, 100,000,000 shares
|
||||
|
authorized;
21,414,868 shares issued and outstanding
|
2,141 | |||
|
Additional
paid in capital
|
663,822 | |||
|
Deficit
accumulated during the development stage
|
(438,093 | ) | ||
|
Total
stockholders' equity
|
227,870 | |||
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 430,365 | ||
See
accompanying summary of accounting policies and notes to financial
statements
2
MobileBits
Corporation
(A
Development Stage Company)
Statement
of Operations
For
the Period from March 24, 2009 (Inception) through October 31,
2009
|
Operating
Expenses:
|
||||
|
General
and administrative
|
$ | 437,819 | ||
|
Amortization
expense
|
274 | |||
|
Total
operating expenses
|
438,093 | |||
|
NET LOSS
|
$ | (438,093 | ) | |
|
Net
loss per common share - basic and diluted
|
$ | (0.02 | ) | |
|
Weighted
average common shares outstanding - basic and
diluted
|
20,279,817 | |||
See
accompanying summary of accounting policies and notes to financial
statements
3
MobileBits
Corporation
(A
Development Stage Company)
Statement
of Changes in Stockholders' Equity
For
the Period from March 24, 2009 (Inception) through October 31,
2009
| Common Stock | AdditionalPaid-in |
Deficit
Accumulated
During
Development
|
||||||||||||||||||
| Shares | Amount | Capital | Stage | Total | ||||||||||||||||
| Balance, March 24, 2009 | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
| Founders shares | 20,000,000 | 2,000 | - | - | 2,000 | |||||||||||||||
| Stock issued for cash net | 1,414,868 | 141 | 642,983 | - | 643,124 | |||||||||||||||
| Stock based compensation | - | - | 20,839 | - | 20,839 | |||||||||||||||
| Net loss | - | - | - | (438,093 | ) | (438,093 | ) | |||||||||||||
| Balance, October 31, 2009 | 21,414,868 | $ | 2,141 | $ | 663,822 | $ | (438,093 | ) | $ | 227,870 | ||||||||||
See accompanying summary of accounting policies
and notes to financial statements
4
MobileBits
Corporation
(A
Development Stage Company)
Statement
of Cash Flows
For
the Period from March 24, 2009 (Inception) through October 31,
2009
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||
|
Net loss
|
$ | (438,093 | ) | |
|
Adjustments to reconcile net loss to net cash
|
||||
|
used in operating
activities:
|
||||
|
Stock
based compensation
|
22,839 | |||
|
Amortization
expense
|
274 | |||
|
Changes in operating assets and liabilities:
|
||||
|
Prepaid
expenses
|
(27,500 | ) | ||
|
Accounts payable and accrued
expenses
|
125,737 | |||
|
Accounts payable and accrued expenses -
related party
|
76,758 | |||
|
Net cash used in operating activities
|
(239,985 | ) | ||
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||
|
Website
development
|
(9,879 | ) | ||
|
Net cash used in investing activities
|
(9,879 | ) | ||
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||
|
Proceeds
from stock, net of offering costs of $7,523
|
643,124 | |||
|
Net cash provided by financing
activities
|
643,124 | |||
|
Net increase in cash
|
393,260 | |||
|
Cash at beginning of period
|
- | |||
|
Cash at end of year
|
$ | 393,260 | ||
|
SUPPLEMENTAL DISCLOSURES OF
CASH
|
||||
|
FLOW INFORMATION
|
||||
|
Cash
paid during year for:
|
||||
|
Interest
|
$ | - | ||
|
Income taxes
|
$ | - | ||
See
accompanying summary of accounting policies and notes to financial
statements
5
MobileBits
Corporation
(A
Development Stage Company)
Notes
to Financial Statements
NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
and nature of business
Organization
MobileBits
Corporation (the “Company” or “MobileBits”) is a Florida corporation with an
inception of March 24, 2009.
Business
MobileBits
Corporation is a global technology company that is focused on providing answers
and highly targeted advertising through its automated MobileBits™ answer engine
via the web and mobile smartphone applications. The Company will offer a
wide range of answers on a broad scope of web-based content.
Basis
of presentation
The
accompanying audited financial statements of MobileBits have been prepared in
accordance with accounting principles generally accepted in the United States of
America.
Development
stage company
On March
24, 2009 (the inception date), the Company commenced its global technology
activities. As of October 31, 2009, the Company has not produced a
sustainable positive cash flow from operations. Accordingly, the
Company’s activities have been accounted for as those of a “Development Stage
Enterprise” as set forth in ASC 915, “Development Stage Entities.”
Among the disclosures required by ASC 915 are that the Company’s financial
statements be identified as those of a development stage company. In addition,
the statements of operations, changes in stockholders equity and cash flows are
required to disclose all activity since the Company’s date of
inception.
The
Company will continue to prepare its financial statements and related
disclosures in accordance with ASC 915 until such time that the Company’s
operations generate significant revenues.
Use
of estimates
In
preparing financial statements, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities in the balance sheet and
revenue and expenses in the statement of expenses. Actual results could differ
from those estimates.
Cash
and cash equivalents
MobileBits
considers all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.
Website
Website
development is recorded at cost and amortized on the straight-line method over
its estimated useful life. Expenditures for normal maintenance are
charged to expense as incurred.
6
Income
taxes
MobileBits
recognizes deferred tax assets and liabilities based on differences between the
financial reporting and tax bases of assets and liabilities using the enacted
tax rates and laws that are expected to be in effect when the differences are
expected to be recovered. MobileBits provides a valuation allowance for deferred
tax assets for which it does not consider realization of such assets to be more
likely than not.
MobileBits
has adopted ASC 740 “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 October 31, 2009,
MobileBits had not recorded any tax benefits from uncertain tax
positions.
Basic
and diluted net loss per share
Basic net
loss per common share is computed by dividing the net loss by the weighted
average number of common shares outstanding. Diluted net loss per common share
is computed by dividing the net loss adjusted on an "as if converted" basis, by
the weighted average number of common shares outstanding plus potential dilutive
securities. Common stock equivalents are excluded from the calculations when
their effect is anti-dilutive.
Stock
compensation
MobileBits
follows ASC 718, “Compensation - Stock Compensation” as interpreted by SEC Staff
Accounting Bulletin No. 107 for financial accounting and reporting standards for
stock-based employee compensation plans. It defines a fair value based method of
accounting for an employee stock option or similar equity instrument. There were
150,000 options were granted from inception through October 31,
2009.
Recently
issued accounting pronouncements
In June
2009, the Financial Accounting Standards Board (“FASB”) issued an update of
Accounting Standards Codification 105, “Generally Accepted Accounting
Principles” (“ASC 105”) which establishes the FASB Accounting Standards
Codification TM (the “ASC”). The ASC is the sole source of
authoritative U.S. generally accepted accounting principles (“GAAP”) recognized
by the FASB to be applied by nongovernmental entities. The ASC
superseded all then-existing non-SEC accounting and reporting standards. All
other non-grandfathered, non-SEC accounting literature not included in the ASC
is no longer authoritative. While the ASC does not change GAAP, it introduces a
new structure that reorganizes the GAAP pronouncements into accounting topics.
All content of the ASC carries the same level of authority. The ASC
is effective for our financial statements as of October 31, 2009. There was no
effect of adoption of this standard on the financial statements.
In May
2009, the FASB issued ASC 855, “Subsequent Events,” which modifies the
definition of subsequent events and requires disclosure of the date through
which an entity has evaluated subsequent events and the basis for that date.
These requirements became effective for us on June 15, 2009. There
was no effect of adoption of this standard on the financial
statements.
The
Company evaluated all events and transactions that occurred after October 31,
2009 through February 8, 2010, the date the Company issues these financial
statements. During this period, the Company did not have any material
events other than as disclosed in Note 9.
MobileBits
does not expect that any other recently issued accounting pronouncements will
have a significant impact on the financial statements of the
Company.
7
NOTE
2 – GOING CONCERN
The
accompanying financial statements have been prepared assuming MobileBits’
continuation as a going concern. Since inception, MobileBits has incurred losses
of approximately $438,093. In addition, MobileBits expects to experience a
continuing operating cash flow deficiency until such a time as it is able to
generate a sustainable source of revenues. These factors raise substantial
doubts as to the Company’s ability to continue as a going concern.
MobileBits
plans to continue to pursue additional equity financing while managing cash flow
in an effort to provide funds to support development activities.
NOTE
3 – CONCENTRATIONS OF CREDIT RISK
The
Company maintains its cash balances in one financial institution. The
balances are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to
$250,000. At October 31, 2009, MobileBits had a cash balance of
$393,260, of which $143,260 was uninsured.
NOTE
4 – WEBSITE
The
following is a summary of website expenditures:
|
Estimated
|
||||||||
|
Useful Life
|
October 31, 2009
|
|||||||
|
Website
development costs
|
3 | $ | 9,879 | |||||
|
Less: accumulated
amortization
|
(274 | ) | ||||||
|
Net
|
$ | 9,605 | ||||||
NOTE
5 – RELATED PARTY TRANSACTIONS
On March
24, 2009, MobileBits entered into a consulting agreement with Walter Kostiuk
(Kostiuk), who assumed the role of President, CEO, Secretary, Treasurer,
Director and Chairman of the Board of Directors. Also on March 24,
2009, Kostiuk was issued 20,000,000 shares of common stock valued at par value,
or $2,000, as founder shares. Since inception, MobileBits expensed compensation
in connection with the consulting agreement of $146,462 and paid $69,704 of the
amount due for services related to the agreement, leaving a payable of $76,758
due to Kostiuk as of October 31, 2009.
NOTE
6 – COMMITMENTS AND CONTINGENCIES
MobileBits’
principal office is located at 1990 Main Street, Suite 750, Sarasota, Florida
34236. The rent through December 31, 2009 was $826 per month plus taxes and
services and increased to $1,100 per month for the period January 1, 2010
through December 31, 2010.
NOTE
7 - INCOME TAXES
Reconciliation
between actual tax expense (benefit) and income taxes computed by applying the
U.S. federal income tax rate and state income tax rate to income from continuing
operations before income taxes are as follows:
|
October
31,
|
||||
|
2009
|
||||
|
Computed
at U.S. and State statutory rates (34%)
|
$ | (148,952 | ) | |
|
Permanent
differences
|
8,377 | |||
|
Changes
in valuation allowance
|
140,574 | |||
|
Total
|
$ | - | ||
8
Tax
effects of temporary differences that give rise to significant portions of the
deferred tax assets and deferred liabilities are presented below:
|
October
31,
|
||||
|
2009
|
||||
|
Deferred
tax assets:
|
||||
|
Net
operating loss carry-forwards
|
$ | 114,477 | ||
|
Accrued
officers’ compensation
|
26,098 | |||
|
Total
Deferred tax assets
|
140,574 | |||
|
Less
valuation allowance
|
(140,574 | ) | ||
|
Total
|
$ | - | ||
At
October 31, 2009, MobileBits had a net operating loss carry-forwards for federal
and state income tax purposes of approximately $336,696 which will begin to
expire, if unused, beginning in 2029. The valuation allowance increased
approximately $140,574 for the year ended October 31, 2009.
The above
estimates are based upon management's decisions concerning certain elections
which could change the relationship between net income and taxable income.
Management decisions are made annually and could cause the estimates to vary
significantly.
NOTE
8 - EQUITY TRANSACTIONS
At
inception, MobileBits issued 20,000,000 shares of common stock valued at par
value to the founder and president.
From
inception through October 31, 2009, the Company sold 1,414,868 common shares at
prices ranging from $0.40 to $0.50 per share to 34 investors for net proceeds of
$643,124.
MobileBits
issued the following options to employees during the period:
|
Weighted-
|
Aggregate
|
|||||||||||
|
Average
|
Intrinsic
|
|||||||||||
|
Options
|
Exercise
Price
|
Value
|
||||||||||
|
Outstanding
at March 24, 2009
|
- | $ | - | $ | - | |||||||
|
Granted
|
150,000 | 0.50 | - | |||||||||
|
Exercised
|
- | - | - | |||||||||
|
Forfeited
|
- | - | - | |||||||||
|
Outstanding
at October 31, 2009
|
150,000 | $ | 0.50 | $ | - | |||||||
|
Exercisable
at October 31, 2009
|
- | $ | - | $ | - | |||||||
The above
options were valued at a total of $57,624 using the Black-Scholes option-pricing
model and the following parameters: (1) 2.75% risk-free discount rate, (2)
expected volatility of 175.32%, (3) $0 expected dividends, and (4) an expected
option life of 5.59 years for each grant based on term of option.
NOTE
9 – SUBSEQUENT EVENTS
From
November 1, 2009 to February 8, 2010, MobileBits has issued an additional
716,000 shares of common stock at prices ranging from $0.30 to $0.50 per share
for net proceeds of $225,000.
MobileBits also issued
50,000 options with an exercise price of $0.50 per share on November 13, 2009
and December 23, 2009 to employees. The November options were
valued at a total of $23,906, using the Black-Scholes option-pricing model and
the following parameters: (1) 2.28% risk-free discount rate, (2) expected
volatility of 174.77%, (3) $0 expected dividends, and (4) an expected option
life of 5.19 years for each grant based on term of option. The
December options were valued at a total of $23,860, using the Black-Scholes
option-pricing model and the following parameters: (1) 2.51% risk-free discount
rate, (2) expected volatility of 174.90%, (3) $0 expected dividends, and (4) an
expected option life of 5.08 years for each grant based on term of
option.
9