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EX-31.2 - SUPERCLICK INCv177492_ex31-2.htm
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EX-32.2 - SUPERCLICK INCv177492_ex32-2.htm

Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-Q

x
Quarterly Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934
 
For The Quarterly Period Ended January 31, 2010.

o
Transition Report Under Section 13 Or 15(d) Of The Securities Exchange Act Of 1934
 
For The Transition Period From ______________To_________________

Commission File Number 333-31238

Superclick, Inc.

(Exact Name Of Registrant As Specified In Its Charter)

Washington
 
52-2219677
(State or Other Jurisdiction of
 
(I.R.S. Employer
Incorporation or Organization)
 
Identification No.)

10222 St-Michel Blvd., Suite 300
Montreal, Quebec, H1H 5H1
 (858) 518-1387

(Address, Including Zip Code, And Telephone Number, Including
Area Code, Of Registrant's mailing address in Montreal, Canada)

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 o

The number of outstanding shares of the issuer's common stock, $0.0006 par value, as of March 12, 2010 was 45,312,251.
 


TABLE OF CONTENTS

     
Page
       
Part I – Financial Information
       
Item 1.
Financial Statements
   
       
Consolidated Balance Sheets as of January 31, 2010 (Unaudited) and October 31, 2009 (audited)
 
1
     
Consolidated Statements of Operations for the three  months ended January, 31, 2010 and 2009 (Unaudited)
 
2
     
Consolidated Statement of Stockholders Equity for the year  ended October 31, 2009 and the three months ended  January 31, 2010 (unaudited)
 
3
     
Consolidated Statements of Comprehensive Income for  the three months ended January 31, 2010 and 2009 (Unaudited)
 
4
     
Consolidated Statements of Cash Flows for the three  months ended January 31, 2010 and 2009 (Unaudited)
 
5
     
Notes To Consolidated Financial Statements (Unaudited)
 
6
       
Item 2.
Management's Discussion and Analysis
 
17
       
Item 3.
Quantitative and Qualitative Disclosures About Market
 
22
       
Item 4.
Controls and Procedures
 
28
       
Part II – Other Information
       
Item 1.
Legal Proceedings
 
28
       
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
28
       
Item 3.
Defaults Upon Senior Securities
 
28
       
Item 4.
Submission of Matters to a Vote of Security Holders
 
29
       
Item 5.
Other Information
 
29
       
Item 6.
Exhibits and Reports on Form 8-K
 
29
       
Signatures
   
30
 


ITEM 1.  FINANCIAL STATEMENTS

SUPERCLICK, INC.
Consolidated Balance Sheets

   
January 31,
2010
   
October 31,
2009
 
   
(Unaudited)
   
(Audited)
 
ASSETS
           
CURRENT ASSETS
           
Cash
  $ 1,872,944     $ 2,192,058  
Accounts receivable, net (Notes A&B)
    1,414,527       1,481,814  
Inventory
    159,468       73,276  
Other current assets
    106,955       36,777  
TOTAL CURRENT ASSETS
    3,553,894       3,783,925  
Fixed assets, net (Note C)
    135,781       126,989  
TOTAL ASSETS
  $ 3,689,675     $ 3,910,914  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
CURRENT LIABILITIES
               
Accounts payable and accrued expenses (Note D)
  $ 612,723     $ 1,132,008  
Deferred revenue (Note E)
    1,303,380       1,184,537  
TOTAL CURRENT LIABILITIES
    1,916,103       2,316,545  
                 
TOTAL LIABILITIES
    1,916,103       2,316,545  
                 
Commitments (Note F)
    -       -  
                 
STOCKHOLDERS' EQUITY (Note G)
               
Common stock, par value $.0006, 175,000,000 shares authorized; issued and outstanding 45,312,251 at January 31, 2010 and October 31, 2009.
    27,729       27,729  
Additional paid-in capital
    6,123,489       6,123,489  
Accumulated deficit
    (4,446,138 )     (4,595,719 )
Accumulated other comprehensive income (loss)
               
(Cumulative translation adjustment)
    83,632       54,010  
Treasury Stock
    (15,140 )     (15,140 )
TOTAL STOCKHOLDERS' EQUITY
    1,773,572       1,594,369  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  $ 3,689,675     $ 3,910,914  

SEE NOTES TO FINANCIAL STATEMENTS
 
1


SUPERCLICK, INC.
Consolidated Statements of Operations (Unaudited)
For the Three Months Ended January 31, 2010 and 2009 

   
Three Months Ended
 
    
January 31,
 
   
2010
   
2009
 
Revenue
           
Net Sales
  $ 614,664     $ 1,062,459  
Services
    1,014,774       809,514  
Net revenue
    1,629,438       1,871,973  
Cost of goods sold
    786,478       921,795  
Gross profit
    842,960       950,178  
                 
Costs and Expenses
               
Selling, general & administrative
    550,329       388,523  
Research & development
    61,257       42,168  
Depreciation
    11,701       11,528  
Total costs and expenses
    623,287       442,219  
                 
Income from operations
    219,673       507,959  
                 
Other Income and (Expense)
               
Interest income
    1,054       584  
Interest expense
    (351 )     (24,746 )
Gain on forgiveness of debt
    -       79,970  
Total other income and (expense)
    703       55,808  
Net income before income taxes
    220,376       563,767  
Income taxes
    70,795       162,311  
Net income
  $ 149,581     $ 401,456  
                 
Net income per common share:
               
Basic
  $ 0.00     $ 0.01  
Diluted
  $ 0.00     $ 0.01  
                 
Weighted average common shares outstanding:
               
Basic
    45,312,251       44,941,523  
Diluted
    59,164,607       60,039,464  

SEE NOTES TO FINANCIAL STATEMENTS

 
2

 

SUPERCLICK, INC.
Consolidated Statement of Stockholder's Equity
For the Year Ended October 31, 2009 and the Three Months Ended January 31, 2010 (Unaudited) 

                           
Deficit
                   
                            
Accumulated
   
Accumulated
             
    
Common Stock
   
Additional
   
During the
   
Other
         
Total
 
    
Number of
               
Paid-in
   
Developmental
   
Comprehensive
   
Treasury
   
Stockholders'
 
    
Shares
   
Amount
   
Payable
   
Capital
   
Stage
   
Income (loss)
   
Stock
   
Equity
 
BALANCES October 31, 2008
    44,937,251     $ 27,504     $ 18,000     $ 6,060,714     $ (5,863,820 )   $ (212,989 )   $ (15,140 )   $ 14,269  
                                                                 
Shares issued during the period:
                                                               
Shares issued for services
    375,000       225.00       (18,000 )     62,775                               45,000  
Other
                                    (24,023 )                     (24,023 )
Foreign Currency Translation Adjustment
                                            266,999               266,999  
Net profit
                                    1,292,125                       1,292,125  
BALANCES October 31, 2009
    45,312,251     $ 27,729     $ -     $ 6,123,489     $ (4,595,719 )   $ 54,010     $ (15,140 )   $ 1,594,369  
                                                                 
Foreign Currency Translation Adjustment
                                            29,622               29,622  
Net profit
                                    149,581                       149,581  
BALANCES January 31, 2010 (Unaudited)
    45,312,251     $ 27,729     $ -     $ 6,123,489     $ (4,446,138 )   $ 83,632     $ (15,140 )   $ 1,773,572  

SEE NOTES TO FINANCIAL STATEMENTS
 
3


SUPERCLICK, INC.
Consolidated Statements of Comprehensive Income (Unaudited)
For the Three Months Ended January 31, 2010 and 2009 

   
Three Months Ended
 
    
January 31,
 
   
2010
   
2009
 
             
Net income
  $ 149,581     $ 401,456  
                 
Other comprehensive income
               
Foreign currency translation adjustment
    29,622       24,206  
                 
Net comprehensive income
  $ 179,203     $ 425,662  

SEE NOTES TO FINANCIAL STATEMENTS
 
4

 
SUPERCLICK, INC.
Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended January 31, 2010 and 2009 

   
Three Months Ended
 
   
January 31,
 
   
2010
   
2009
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net income
  $ 149,581     $ 401,456  
Adjustments to reconcile net income
               
to net cash provided (used) by operating activities:
               
Depreciation
    11,699       11,528  
Gain on forgiveness of debt
    -       (79,970 )
Deferred taxes
    -       (117,267 )
CHANGES IN ASSETS AND LIABILITIES:
               
Accounts receivable
    86,338       609,230  
Other current assets
    (82,799 )     (16,034 )
Inventory
    (86,460 )     54,162  
Accounts payable and accrued expenses
    (39,354 )     (237,168 )
Accrued payroll
    (136,940 )     (21,685 )
Income taxes payable and receivable
    (348,821 )     242,306  
Deferred revenue
    106,865       (325,883 )
CASH (USED) PROVIDED BY OPERATING ACTIVITIES
    (339,891 )     520,675  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Acquisition of furniture and equipment
    (18,912 )     -  
CASH (USED) FOR INVESTING ACTIVITIES
    (18,912 )     -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Repayment of loans
    -       (3,259 )
Repayment of convertible debenture
    -       (761,588 )
                 
CASH (USED) FOR FINANCING ACTIVITIES
    -       (764,847 )
                 
EFFECT OF EXCHANGE RATE CHANGES ON CASH
    39,689       (17,960 )
NET INCREASE (DECREASE) IN CASH
    (319,114 )     (262,132 )
CASH, beginning of period
    2,192,058       781,520  
CASH, end of period
  $ 1,872,944     $ 519,388  
                 
Interest paid
  $ 351     $ 22,503  
Taxes paid
  $ 424,668     $ -  

SEE NOTES TO FINANCIAL STATEMENTS
 
5


SUPERCLICK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED JANUARY 31, 2010 AND 2009

NOTE A-ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Basis of Presentation
 
The unaudited financial statements of Superclick, Inc. as of January 31, 2010 and for the three month period ended January 31, 2010 and 2009 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting.  Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Superclick, Inc's Form 10-KSB for the year ended October 31, 2009.   In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the interim financial information have been included.   The results of operations for any interim period are not necessarily indicative of the results of operations for the entire year.
 
Organization
Superclick Networks, Inc. was organized on August 24, 2000, in Montreal, Quebec, Canada. Superclick, Inc. was incorporated on June 3, 1999.  As a result of a reverse merger in 2003, Superclick Networks Inc. is considered the parent for financial reporting purposes.
  
Superclick Networks, Inc. is in the business of providing and installing broadband high speed Internet connection equipment and IP (“Internet Protocol”) infrastructure management systems with 24x7x365 help desk support predominantly to hotels on a worldwide basis.  However, the Superclick solution is also deployed in multi dwelling units (“MDU’s”), universities and Hospitals. Superclick, Inc. commercialized its initial Internet access management products in 2002.
 
All share and per share amounts shown in these financial statements reflect the stock split for all periods presented.

Superclick, Inc’s plan of business is committed to the commercialization activities of Superclick Network, Inc.’s products, with an emphasis on broadening its market penetration and building product and brand awareness amongst its target customer base in the hospitality and healthcare markets. Superclick, Inc. intends to grow its revenue through expanding its sales of Superclick Network, Inc.’s products and call center support services such that it can reasonably support its operating expenses through cash flow.

Summary of Significant Accounting Principles

Principles of consolidation
The consolidated financial statements include the accounts of Superclick, Inc. and its wholly-owned subsidiary, Superclick Networks, Inc. which is 100% consolidated in the financial statements.  All material inter-company accounts and transactions have been eliminated.
 
6

 
NOTE A-ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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.  Actual results could differ from those estimates.

Cash and cash equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

Accounts receivable
Accounts receivable are reported at the customers' outstanding balances less any allowance for doubtful accounts. Interest is not accrued on overdue accounts receivable.  The Company evaluates receivables on a regular basis for potential reserve.

Inventories
Inventories are valued at the lower of cost or market. Cost is determined on a first-in, first-out method.  Management performs periodic assessments to determine the existence of obsolete, slow moving and non-salable inventories, and records necessary provisions to reduce such inventories to net realizable value.

Property and equipment
Property and equipment are stated at cost.  Major renewals and improvements are charged to the asset accounts while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed.  At the time property and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts.  Gains or losses from retirements or sales are credited or charged to income.

The Company depreciates its property and equipment on a declining balance method at the following rates as applied to net depreciable value:

Furniture and fixtures:
    20 %
Computer equipment and software:
    30 %
Leasehold improvements
    20 %
Fabrication equipment
    20 %

Long-lived assets
Accounting for the Impairment or Disposal of Long-Lived Assets requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may not be recovered.  The Company assesses recoverability of the carrying value of an asset by estimating the fair value of the asset.  If the fair value is less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value.  The Company has never recognized an impairment charge.
 
7

 
NOTE A – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Revenue recognition policy
Revenue from the sale of Internet high speed connection equipment and installation is recognized when the earning process is complete and the risk and rewards of ownership have transferred to the customer, which is considered to have occurred after the delivery and installation of the equipment to the customer.

Deferred revenue
Deferred revenue related to support and maintenance is recorded in a manner consistent with the Company’s revenue recognition policy.  The Company typically enters into one-year upgrade and maintenance contracts with its customers.  The upgrade and maintenance contracts are generally paid in advance.  The Company defers such payment and recognizes revenue ratably over the contract period.

Shipping and handling costs
The Company's policy is to classify shipping and handling costs as part of cost of goods sold in the statement of operations.

Advertising
The Company expenses all advertising as incurred.  For the three months ended January 31, 2010 and 2009, the Company incurred approximately $8,529 and $0, respectively in marketing and advertising expense.

Earnings per common share
The Company reports both basic and diluted earnings per share.  Basic earnings per share are calculated using the weighted average number of common shares outstanding in the period.  Diluted earnings per share includes potentially dilutive securities such as outstanding options and warrants using the “treasury stock” method and convertible securities using the “if-converted” method.

Issuance of common stock
The issuance of common stock for other than cash is recorded by the Company at management’s estimate of the fair value of the assets acquired or services rendered.

Income taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.  Under this method, deferred tax assets and liabilities are determined based on differences between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
 
8

 
NOTE A – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Income taxes (Continued)
The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized.  In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations.  A valuation allowance is established against deferred tax assets that do not meet the criteria for recognition.  In the event the Company were to determine that it would be able to realize deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance which would reduce the provision for income taxes.

The Company follows the accounting guidance which provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits.  Income tax provisions must meet a more-likely-than-not recognition threshold at the effective date to be recognized initially and in subsequent periods.

Also included is guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Recent Accounting Pronouncements
On July 1, 2009, the FASB officially launched the FASB ASC 105 - Generally Accepted Accounting Principles, which established the FASB Accounting Standards Codification (“the Codification”), as the single official source of authoritative, nongovernmental, U.S. GAAP, in addition to guidance issued by the Securities and Exchange Commission.  The Codification is designed to simplify U.S. GAAP into a single, topically ordered structure.  All guidance contained in the Codification carries an equal level of authority.  The Codification is effective for interim and annual periods ending after September 15, 2009.  Accordingly, the Company refers to the Codification in respect of the appropriate accounting standards throughout this document as “FASB ASC”.  Implementation of the Codification did not have any impact on the Company’s consolidated financial statements.

On June 30, 2009, the FASB issued Accounting Standard Update (ASU) No. 2009-01 (Topic 105) – Generally Accepted Accounting Principles – amendments based on – Statement of Financial Accounting Standards No. 168 –The FASB Accounting and Standards Codification and the Hierarchy of Generally Accepted Accounting Principles.  Beginning with this Statement the FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts.  Instead, it will issue Accounting Standard Updates.  This ASU includes FASB Statement No. 168 in its entirety.  While ASU’s will not be considered authoritative in their own right, they will serve to update the Codification, provide the bases for conclusions and changes in the Codification, and provide background information about the guidance.  The Codification modifies the GAAP hierarchy to include only two levels of GAAP: authoritative and nonauthoritative.  ASU No. 2009-01 is effective for financial statements issued for the interim and annual periods ending after September 15, 2009, and the Company does not expect any significant financial impact upon adoption.
 
9

 
NOTE A – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Recent Accounting Pronouncements (Continued)

In August 2009, the FASB issued ASU No. 2009-05 – Fair Value Measurements and Disclosures (Topic 820) – Measuring Liabilities at Fair Value.  This ASU clarifies the fair market value measurement of liabilities.  In circumstances where a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following techniques: a technique that uses quoted price of the identical or a similar liability or liabilities when traded as an asset or assets, or another valuation technique that is consistent with the principles of Topic 820 such as an income or market approach.  ASU No. 2009-05 was effective upon issuance and it did not result in any significant financial impact on the Company upon adoption.

In September 2009, the FASB issued ASU No. 2009-12 – Fair Value Measurements and Disclosures (Topic 820) – Investments in Certain Entities That Calculate Net Asset Value per Share (or its equivalent).  This ASU permits use of a practical expedient, with appropriate disclosures, when measuring the fair value of an alternative investment that does not have a readily determinable fair value.  ASU No. 2009-12 is effective for interim and annual periods ending after December 15, 2009, with early application permitted.  Since the Company does not currently have any such investments, it does not anticipate any impact on its financial statements upon adoption.

In May 2009, the FASB issued FASB ASC 855, “Subsequent Events.”  This Statement addresses accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued.  FASB ASC 855 requires disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, the date issued or date available to be issued.  The Company adopted this Statement in the third quarter of fiscal 2009.  As a result the date through which the Company has evaluated subsequent events and the basis for that date have been disclosed in Note K, Subsequent Events.

In April 2009, the FASB issued an update to FASB ASC 820, “Fair Value Measurements and Disclosures,” related to providing guidance on when the volume and level of activity for the asset or liability have significantly decreased and identifying transactions that are not orderly.  The update clarifies the methodology to be used to determine fair value when there is no active market or where the price inputs being used represent distressed sales.  The update also reaffirms the objective of fair value measurement, as stated in FASB ASC 820, which is to reflect how much an asset would be sold in and orderly transaction, and the need to use judgment to determine if a formerly active market has become inactive, as well as to determine fair values when markets have become inactive.  The Company adopted this Statement in the second quarter of 2009 without significant financial impact.

In April 2009, the FASB ASC 320, “Investments – Debt and Equity,” amends current other-than-temporary guidance for debt securities through increased consistency in the timing of impairment recognition and enhanced disclosures related to credit and noncredit components impaired debt securities that are not expected to be sold.  Also, the Statement increases disclosures for both debt and equity securities regarding expected cash flows, securities with unrealized losses, and credit losses.  The Company adopted this Statement in the second quarter of 2009 without significant impact to our financial statements.
 
10

 
NOTE A – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Recent Accounting Pronouncements (Continued)

In April 2009, the FASB issued an update to FASB ASC 825, “Financial Instruments,” to require interim disclosures about the fair value of financial instruments.”  This update enhances consistency in financial reporting by increasing the frequency of fair value disclosures of those assets and liabilities falling within the scope of FASB ASC 825. The Company adopted this update in the second quarter of 2009 without significant impact to the financial statements.

In April 2009, the FASB issued an update to FASB ASC 805, “Business Combinations,” that clarifies and amends FASB ASC 805, as it applies to all assets acquired and liabilities assumed in a business combination that arise from contingencies.  This update addresses initial recognition and measurement issues, subsequent measurement and accounting, and disclosures regarding these assets and liabilities arising from contingencies in a business combination.  The Company adopted this Statement in the second quarter of 2009 without significant impact to the financial statements.

Concentrations of credit risk
The Company performs ongoing credit evaluations of its customers.  At January 31, 2010, one customer accounted for 44% of accounts receivable.  At January 31, 2009, two customers accounted for 35% (23% and 12%) of accounts receivable.

During the three months ended January 31, 2010, no customer accounted for more than 10% of sales. During the three months ended January 31, 2009, the Company’s two largest customers accounted for 24% (14% and 10%) of sales.

For the three months ended January 31, 2010 and 2009, approximately 52% and 38% of the Company's net sales were made to customers outside the United States.

The Company has maintained balances in excess of federally insured limits from time to time during the fiscal year.  Management periodically reviews the adequacy and strength of the financial institutions and deems this to be an acceptable risk.

Accounting for Share-Based Compensation
The Company accounts for all compensation related to stock, options or warrants using a fair value based method whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period.  Stock issued for compensation is valued using the market price of the stock on the date of the related agreement.  We use the Black-Scholes pricing model to calculate the fair value of options and warrants issued to both employees and non-employees.  In calculating this fair value, there are certain assumptions that we use consisting of the expected life of the option, risk-free interest rate, dividend yield, volatility and forfeiture rate.  The use of a different estimate for any one of these components could have a material impact on the amount of calculated compensation expense.
 
11

 
NOTE A – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Foreign Currency Translation
The financial statements of the Canadian Subsidiary are measured using the Canadian dollar as the functional currency.  Assets, liabilities and equity accounts of the company are translated at exchange rates as of the balance sheet date or historical acquisition date, depending on the nature of the account.  Revenues and expenses are translated at average rates of exchange in effect throughout the year.  The resulting cumulative translation adjustments have been recorded as a separate component of stockholders' equity.  The financial statements are presented in United States of America dollars.

Research and development
Expenses related to present and future products are expensed as incurred.

NOTE B – ACCOUNTS RECEIVABLE

The accounts receivable balance at January 31, 2010 and October 31, 2009 consisted of $1,414,527 and $1,481,814, respectively, and is reported net of an allowance for doubtful accounts of $45,327 and $44,806, respectively.

NOTE C - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at January 31, 2010 and October 31, 2009:

   
2010
   
2009
 
Computer hardware
  $ 227,088     $ 205,834  
Furniture & fixtures
    146,741       145,052  
Computer software
    98,860       97,722  
Leasehold improvements
    32,978       32,599  
Fabrication mold and dye
    21,362       21,116  
      527,029       502,323  
Accumulated depreciation
    (391,248 )     (375,334 )
Fixed assets, net
  $ 135,781     $ 126,989  
 
Depreciation expense for the three months ended January 31, 2009 and 2008 was $11,699 and $11,528, respectively.
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NOTE D – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following at January 31, 2010 and October 31, 2009:
 
   
2010
   
2009
 
Trade payables
  $ 238,704     $ 333,826  
Professional fees
    64,143       25,762  
Accrued wages payable
    144,674       276,722  
Income taxes payable
    (21,554 )     330,718  
Refunds payable
    165,202       164,980  
    $ 612,723     $ 1,132,008  
 
As of January 31, 2010, accrued payroll included $19,511 and $15,133 due to the CEO and CFO, respectively.  As of October 31, 2009, accrued payroll included $101,184 and $56,612 due to the CEO and CFO, respectively.

Income taxes payable
During the three months ended January 31, 2010 we made payments to the Canadian Federal and Provincial tax authorities of $424,668.

The Company recorded a provision for income taxes of $611,732 for the year ended October 31, 2009 based on a combined Federal and Provincial tax rate of 32%.   The Company updates the estimate of its annual effective tax rate at the end of each quarterly period.  The Company’s estimate takes into account estimations of annual pre-tax income, the geographic mix of pre-tax income and its interpretations of tax laws and the possible outcomes of current and future audits.

NOTE E – DEFERRED REVENUE

Deferred revenue consists of funds received in advance of services being performed.  As of January 31, 2010, the deferred revenue balance of $1,303,380 consisted of 1) $968,998 related to support and maintenance for multiple customers; 2) $116,650 related to the sale of a master license agreement which commenced August 2007 and is being amortized over its term of thirty six (36) months; and 3) $217,732 related to customer deposits for future hardware installations.

As of October 31, 2009, the deferred revenue balance of $1,184,537 consisted of 1) $914,739 related to support and maintenance for multiple customers; 2) $174,985 related to the sale of a master license agreement which commenced August 2007 and is being amortized over its term of thirty six (36) months; and 3) $94,813 related to customer deposits for future hardware installations.

NOTE F - COMMITMENTS

On October 1, 2009 the Company renewed a lease for office space. The lease extends through September 30, 2014 at a rate of $4,695 per month.  During the three months ended January 31, 2010 and 2009, the Company incurred $16,874 and $15,738, respectively, in rent expense.
 
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The Company does not maintain any long-term or exclusive commitments or arrangements to purchase merchandise from any single supplier.
 
NOTE G - PREFERRED AND COMMON STOCK

Preferred Stock
The Company has authorized 20,000,000 shares of $.0001 par value preferred stock available for issuance.  No shares of preferred stock have been issued as of January 31, 2010

Common Stock
During the year ended October 31, 2009, the Company issued 75,000 shares of common stock in exchange for director services.  The shares were issued for services performed in fiscal year 2008 which expense of $9,000 was recognized in our fiscal year ending October 31, 2008.  The balance of $9,000 expensed in 2008 was reversed as a credit to stock compensation expense during 2009.  During the year ended October 31, 2009, the Company issued 300,000 irrevocable restricted shares of common stock in exchange for investor relations services valued at fair market value of $0.18 per share or $54,000.

During the three months ended January 31, 2009, the Company did not issue any common stock.

Common Stock Options
During the year ended October 31, 2009, 100,000 options were canceled and none granted or exercised.

During the three months ended January 31, 2010, no options were canceled or granted.

NOTE H – STOCK INCENTIVE PLANS

The 2004 Incentive Stock Option Plan
On April 8, 2004, the Board of Directors of the Company adopted the 2004 Incentive Stock Option Plan. This Plan is a plan for key Employees (including officers and employee directors) and Consultants of the Company and its Affiliates and is intended to advance the best interests of the Company, its Affiliates, and its stockholders by providing those persons who have substantial responsibility for the management and growth of the Company and its Affiliates with additional incentives and an opportunity to obtain or increase their proprietary interest in the Company, thereby encouraging them to continue in the employ of the Company or any of its Affiliates.

The Company may issue each of the following under this Plan: Incentive Option, Nonqualified Option, Stock Appreciation Right, Restricted Stock Award or Performance Stock Award The Plan was effective April 9, 2004 (the "Effective Date"), provided that within one year of the Effective Date, the Plan shall have been approved by at least a majority vote of stockholders. No Incentive Option, Nonqualified Option, Stock Appreciation Right, Restricted Stock Award or Performance Stock Award shall be granted pursuant to the Plan ten years after the Effective Date.

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NOTE H – STOCK INCENTIVE PLANS

The 2004 Incentive Stock Option Plan (Continued)

During the year ended October 31, 2009, 100,000 options were canceled and none granted or exercised.

During the three months ended January 31, 2010, there was no option activity.

The following table summarizes the Company's stock option activity for the three months ended January 31, 2010:

   
2010
 
          
Weighted Average
 
    
Shares
   
Exercise Price
 
             
Outstanding at beginning of year
    13,852,356     $ 0.075  
Granted
    -       -  
Forfeited
    -       -  
Exercised
    -       -  
Outstanding at end of year
    13,852,356       0.075  
                 
Options exerciseable at year end
    13,852,356          
 
The following table summarizes information about the Company's stock options outstanding at January 31, 2010:

     
Options Outstanding
   
Options Exercisable
 
      
Number
   
Weighted
   
Weighted
         
Weighted
 
 
Range of
 
Outstanding
   
Average
   
Average
         
Average
 
 
Exercise
 
At January 31,
   
Contractural
   
Exercise
   
Number
   
Exercise
 
 
Prices
 
2010
   
Life (years)
   
Price
   
Outstanding
   
Price
 
                                 
0.50
    589,856       -     $ 0.500       589,856     $ 0.500  
 
0.65
    137,500       -       0.650       137,500       0.650  
 
0.05
    13,125,000       -       0.050       13,125,000       0.050  
Total     13,852,356       -     $ 0.075       13,852,356     $ 0.075  

The Company measures the fair market value of stock options granted using the Black-Scholes Option Pricing Model on the date of grant and recognizes related compensation expense ratably over the options vesting period for all future grants.  The Company also estimates the amount of forfeitures or the amount of options that will be canceled in the future.  During the three months ended January 31, 2010 and the years ended October 31, 2009 and 2008, the Company recognized no compensation expense.  The Company has recorded compensation expense of $767,017 through January 31, 2010.
 
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NOTE H – STOCK INCENTIVE PLANS
 
2004 Superclick, Inc. Non-Employee Director's Stock Incentive Plan

On December 31, 2003, the Board of Directors of the Company adopted the 2004 Superclick, Inc. Non-Employee Director's Stock Incentive Plan.

During the year ended October 31, 2009, the Company issued 75,000 shares of common stock in exchange for director services.  The shares were issued for services performed in fiscal year 2008 which expense of $9,000 was recognized in our fiscal year ending October 31, 2008.

No awards under the Non-Employee Director's Stock Incentive Plan were granted or issued during the three months ended January 31, 2010

From inception through October 31, 2009, the Company has issued 2,569,772 shares to our directors under this stock incentive plan.

NOTE I – RELATED PARTY TRANSACTION

Mr. Pitcher, Chairman of the Company’s Board of Directors, provides consulting services to the Company in exchange for monthly compensation of $5,000 and related expenses.  During the three months ended January 31, 2010 and 2009, Mr. Pitcher received $17,220 and $15,300, respectively.

Mr. Ronald A. Fon became a Director of the Company during February 2009.  Mr. Fon is also a principal with a firm that provides investor relations (IR) consulting services to the Company for monthly compensation of approximately $3,120.  During the three months ended January 31, 2010 and 2009 approximately $19,683 and $nil, respectively was paid to the IR firm.

NOTE J – LEGAL PROCEEDINGS

On November 17, 2009 the Company was named as a defendant by Nomadix, Inc. in a complaint for patent infringement of certain U.S. patents.  The matter is early in its process and it is not possible to reasonably determine the outcome of this complaint. The Company has been monitoring this situation closely and believes it has meritorious defenses to the claims. Accordingly, it is not possible, to assess whether or not the Company needs to reserve for a potential settlement.

NOTE K - SUBSEQUENT EVENTS

Pursuant to FASB Accounting Standards Codification 855, Subsequent Events, the Company evaluated subsequent events through the date the accompanying financial statements were completed on March 12, 2010, and noted there were no qualifying events.
 
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ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We derive the majority of our revenue from the installation of our Superclick Internet Access Management System (SIMS) and from revenue generated from our call center. Support fees are tied to the number of rooms serviced in a client’s property. Due to our reliance on installations, variations in revenue levels may cause fluctuations in quarterly results.   Factors such as a client's commitment to providing internet access to their guests, general economic and industry conditions and other issues could affect our revenue and earnings.

In addition to our North American operations, we have installations and contracts in Europe, Asia, Middle East and the Caribbean.  With the exception of Canadian operations, the majority of transactions in other regions are denominated using the United States dollar.  However, some of our transactions are in Canadian dollars and we are therefore exposed to currency fluctuation risks.

We continue to develop our product offering and IP management solutions, listening carefully to our customers to determine development paths that most directly meet their needs. Superclick emerged from the development stage during the fiscal year ended October 31, 2005.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in the accompanying financial statements and related footnotes.  We base our estimates and assumptions on historical experience, observance of industry trends and various other sources of information and factors.  Actual results may differ from these estimates.  Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially could result in materially different results under different assumptions and conditions.  In consultation with our Board of Directors, we have identified six accounting principles that we believe are key to an understanding of our financial statements.  These important accounting policies require management's most difficult, subjective judgments.

Revenue Recognition

Revenue from the sale of Internet high speed connection equipment and installation is recognized when the earning process is complete and the risk and rewards of ownership have transferred to the customer, which is considered to have occurred after the delivery and installation of the equipment to the customer.

Maintenance and support revenue is recognized ratably over the maintenance term.  First-year maintenance typically is sold with the related software license and renewed on an annual basis thereafter. Estimated fair values of ongoing maintenance and support obligations are based on separate sales of renewals to other customers or upon renewal rates quoted in the contracts.  For such arrangements with multiple obligations, we allocate revenue to each component of the arrangement based on the estimated fair value of the undelivered elements.  Fair value of services, such as consulting or training, is based upon separate sales of these services.  At times, we may enter into multiple-customer contracts in which we allocate revenue based on the number of specified users at each customer, and recognizes revenue upon customer acceptance and satisfying the other applicable conditions of the above described accounting policy.
 
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Accounts receivable

Accounts receivable are reported at the customers' outstanding balances less any allowance for doubtful accounts.  Interest is not accrued on overdue accounts receivable.  We evaluate receivables outstanding greater than ninety days on a regular basis for potential reserve.

Inventories

Inventories are valued at the lower of cost or market.  Cost is determined on a first-in, first-out method or market.  Management performs periodic assessments to determine the existence of obsolete, slow moving and non-salable inventories, such as discontinued products, and records necessary provisions to reduce such inventories to net realizable value.

Income taxes

Provisions for income taxes are based on taxes payable or refundable for the current period and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements.  Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled as prescribed in FASB Statement No. 109, Accounting for Income Taxes.  In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109” (“FIN 48”).  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes” (SFAS 109”).  FIN 48 prescribes a two-step process to determine the amount of tax benefit to be recognized.  First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination.  If the tax position is deemed “more-likely-than-not” to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements.  The amount of the benefit that may be recognized is the largest amount that has a greater than 50 percent likelihood of being realized upon ultimate settlement.  As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.  The Company underwent a change of control for income tax purposes on October 8, 2003 according to Section 381 of the Internal Revenue Code. The Company's utilization of U.S. Federal net operating losses will be limited in accordance to Section 381 rules.  As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
 
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Foreign Currency Translation

The financial statements of our Canadian subsidiary are measured using the Canadian dollar as the functional currency.   Assets, liabilities and equity accounts of the company are translated at exchange rates as of the balance sheet date or historical acquisition date, depending on the nature of the account. Revenues and expenses are translated at average rates of exchange in effect during the period. The resulting cumulative translation adjustments have been recorded as a separate component of stockholders' equity. The financial statements are presented in United States of America dollars.

Results of Operations

THREE MONTHS ENDED JANUARY 31, 2010 AND 2009

Revenue

During the three months ended January 31, 2010, revenue was $1,629,438 compared to $1,871,973 for the three months ended January 31, 2009.  Services revenue, which includes revenue generated from guest support services, grew $205,260 to $1,014,774 from last year’s $809,514; a 25.4% favorable variance.  However, net sales which includes installation revenue, declined by $447,795 to $614,664 from $1,062,459 last year; a 42.1% unfavorable variance. The unfavorable net sales revenue variance was mainly due to the postponement of certain deployments to future periods.

Gross Profit

Gross profit for the three months ended January 31, 2010 decreased by $107,218 or 11.3% to $842,960 compared to $950,178 for the three months ended January 31, 2009.  Gross margin for the period was 51.7% compared to 50.8% for the previous year’s comparable period; a 0.9% improvement. The decrease in gross profit was mainly due to the unfavorable sales variance whereas the favorable gross margin variance was mainly due to the period’s sales mix where services revenue, which typically produces higher margins, represented a larger percentage of the total revenue than net sales or installation revenue.

Selling, General and Administrative

For the three months ended January 31, 2010 and 2009, selling, general and administrative expenses (SG&A) increased $161,806 to $550,329 or 33.8% of net revenue compared to $388,523 or 20.8% of net revenue during the three months ending January 31, 2009. The increase in SG&A for the period was mainly due to increases in selling expenses of approximately $88,000 and approximately $74,000 in general and administrative expenses.

The unfavorable selling expense variance was mainly due to increases in salaries as a result of the increased sales force of approximately $52,000 and approximately $35,000 due to increased business development activities including travel.

The general and administrative expense unfavorable variance was comprised mainly of approximately $18,000 of increased legal fees, $29,000 in consulting fees which includes investor relations, director fees and other related and approximately $33,000 as a result of foreign exchange fluctuations during the period.
 
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Research and Development

For the three months ended January 31, 2010 and 2009, research and development expense was $61,257 and $42,168, respectively.  The $19,089 or 45.3% year-over-year increase was mainly due to increased resource costs of approximately $9,000 and $10,000 for the purchase of required R&D equipment.

Income from operations

Income from operations for the three months ended January 31, 2010 was $219,673 or 13.5% of net revenue compared to $507,959 or 27.1% of net revenue for the three months ended January 31, 2009; a $288,286 or 56.8% unfavorable variance.

Other Income and Expense

Total other income and expense for the three months ended January 31, 2010 was income of $703 compared to income of $55,808 the previous year.  For the three months ended January 31, 2010 the $703 is comprised of $1,054 of interest income offset by $351 of interest expense.  For the three months ended January 31, 2009 the $55,808 is comprised of $24,476 of interest expense primarily related to the debentures and a note payable, offset by $584 of interest income and $79,970 of gain resulting from a negotiated settlement of the entire debenture balance.

Net Income

The net income before income taxes for the three months ended January 31, 2010 was $220,376 or 13.5% of net revenue representing an a decrease of $343,391 or 60.9% compared to $563,767 or 30.1% of net revenue during the three months ended January 31, 2009.  The Company recorded $70,795 in income tax expense during the three months ended January 31, 2010 compared to $162,311 in 2009.  Net income for the quarter ended January 31, 2010 was $149,581 or 9.2% of net revenue compared to $401,456 or 21.4% of net revenue during 2009 representing a decrease of $251,875 or 62.7% in the bottom line.

Net Income (Loss) Per Common Share

For the three months ended January 31, 2010, the net income per common share basic and fully diluted was $0.00, compared to $0.01 basic and fully diluted for the three months ended January 31, 2009.  The basic and fully diluted weighted average shares for the first quarter of 2010 were 45,312,251 and 59,164,607, respectively.  The basic and fully diluted weighted average shares for the first quarter of 2009 were 44,941,523 and 60,039,464, respectively.

Financial Condition

From inception to January 31, 2009, we have incurred an accumulated deficit of $4,446,138.  This loss has been incurred through a combination of professional fees and expenses supporting our plans to acquire synergistic businesses as well as continued operating losses.  However, from 2007 through the current quarter we have experienced stabilization in our business and implemented efficiency initiatives that have resulted in a larger customer base and improved profitability that has allowed us to reduce our accumulated deficit by $3,856,737 from its high of $8,302,875 as of January 31, 2007.
 
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During the three months ended January 31, 2010 we had a net decrease in cash of $319,114.  Total cash resources as of January 31, 2010 was $1,872,944 compared to $2,192,058 at October 31, 2009.

Our available working capital and capital requirements will depend upon numerous factors, including the deployment and sale of Internet access management solutions, the timing and cost of expanding into new markets, the cost of developing competitive technologies, changes in our existing collaborative and licensing relationships, the resources that we devote to developing new products and commercializing capabilities, the status of our competitors, our ability to establish collaborative arrangements with other organizations, and our ability to attract and retain key employees.

The Company's Liquidity Plan

Net income for the three months ended January 31, 2010 was $149,581 compared to $401,456 for the three months ended January 31, 2009 and the operations used $339,891 of cash compared to providing $520,675 for the three months ended January 31, 2010 and 2009, respectively.

During the years ended October 31, 2009 and 2008 and the three months ended January 31, 2010, the Company has financed operations solely with cash generated through sales and the collection of its accounts receivable.

During 2009, the Company paid $203,317 in satisfaction of all Hotel Net note holders. All notes have been paid in full as at October 31, 2009.

On January 23, 2009, the Company made a $726,079 settlement payment in full satisfaction of all outstanding debentures.  This payment was in addition to other principle payments of $41,588 made during the quarter.  The holder of our debentures accepted 90% of the outstanding principle and interest in full satisfaction resulting in a gain to the Company of $79,970.

Our need to raise additional equity or debt financing and our ability to generate cash flow from operations will depend on its future performance and our ability to successfully implement business and growth strategies.  Our performance will also be affected by prevailing economic conditions.  Many of these factors are beyond our control.  If future cash flows and capital resources are insufficient to meet our commitments, we may be forced to reduce or delay activities and capital expenditures or obtain additional equity capital.  In the event that we are unable to do so, we may be left without sufficient liquidity.

Off-Balance Sheet Arrangements

At January 31, 2010 we had no obligations that would qualify to be disclosed as off-balance sheet arrangements.

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Contractual Obligations

Operating lease obligations:  Operating lease obligations consist of office rental commitment for our offices in Montréal, Québec, Canada.   On October 1, 2009 we renewed a lease for office space in Montréal.  The lease extends through September 30, 2014 at a rate of $4,695 per month.

Inflation

Although our operations are influenced by general economic conditions, we do not believe inflation had a material effect on the results of operations during the three and nine months ended January 31, 2010.   However, there can be no assurance our business will not be affected by inflation in the future.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

RISK FACTORS


We may be subject to indemnification obligations to our customers related to patent infringement suits brought by separate vendors in our industry against some of our customers.
 
We have been made aware that several companies providing public Internet access have been named in a lawsuit brought by a party claiming patent infringement. We have not been named in this action, although some companies that have been named are our customers. We have provided indemnification in our service contracts to several of these customers. We believe that it is too early to determine whether we have any exposure, but we have retained and consulted legal counsel to maintain a vigilant and proactive posture. We are actively discussing with our counsel ways that we can limit our potential liability. We are not defendants to this suit, nor have we retained litigation counsel on the matter. We will continue to monitor the situation. If we are named in the suit, it will require us to incur legal expenses, which will have a negative impact on our profitability. This in turn, may have a negative impact on our stock price.

Risks Related To Our Business:

Our revenue and operating results may fluctuate significantly from quarter to quarter, and fluctuations in operating results could cause its stock price to decline.

Our revenue and operating results may vary significantly from quarter-to-quarter due to a number of factors.   In future quarters, operating results may be below the expectations of public market analysis or investors, and the price of its common stock may decline.   Factors that could cause quarterly fluctuations include:
 
22

 
§
the beginning and ending of significant contracts during a quarter;
§
the number, size and scope of the installation contracts;
§
maintenance contracts can create variations in revenue levels and may cause fluctuations in quarterly results;
§
fluctuations in demand for services resulting from budget cuts, project delays, cyclical downturns or similar events, including the recent economic downturn;
§
the possibility and subsequent duration of conflicts involving the United States military could cause delays in program operations related to our hospitality clients by reducing travel;
§
clients' decisions to divert resources to other projects, which may limit clients' resources that would otherwise be allocated to solutions that we provide;
§
recessionary pressures in the United States may reduce the level of travel for business and leisure, which may, in turn limit our clients’ resources that would otherwise be allocated to solutions that we provide;
§
reductions in the prices of services offered by competitors; and
§
because a significant portion of expenses are relatively fixed, a variation in the number of installations or the timing of the initiation or the completion of client contracts may cause significant variations in operating results from quarter-to-quarter and could result in losses.

Any inability to adequately retain or protect our employees, customer relationships and proprietary technology could harm our ability to compete.

Our future success and ability to compete depends in part upon our employees, customer relationships, proprietary technology and trademarks, which we attempt to protect with a combination of patent, copyright, trademark and trade secret claims, as well as with our confidentiality procedures and contractual provisions. These legal protections afford only limited protection and are time-consuming and expensive to obtain and/or maintain. Further, despite our efforts, we may be unable to prevent third parties from soliciting our employees or customers or infringing upon or misappropriating our intellectual property.

Our employees, customer relationships and intellectual property may not be adequate to provide us with a competitive advantage or to prevent competitors from entering the markets for our products and services. Additionally, our competitors could independently develop non-infringing technologies that are competitive with, and equivalent or superior to, our technology. Monitoring infringement and/or misappropriation of intellectual property can be difficult, and there is no guarantee that we would detect any infringement or misappropriation of our proprietary rights.
Even if we do detect infringement or misappropriation of our proprietary rights, litigation to enforce these rights could cause us to divert financial and other resources away from our business operations. The departure of certain key personnel could harm the financial condition of the Company.

Sandro Natale, one of our founders and our current CEO, is intimately involved in our business and has day-to-day relationships with critical customers. Mr Natale is also critical to our product development.

We may not be able to afford additional staff to supplement these key personnel. Competition for highly skilled business, product development, technical and other personnel is intense, and there can be no assurance that we will be successful in recruiting new personnel or in retaining our existing personnel. A failure on our part to retain the services of key personnel could have a material adverse effect on our operating results and financial condition. We do not maintain key man life insurance on any of our employees.
 
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A third party has asserted that we and our customers are infringing on its intellectual property. Whether successful or not, it could subject us to costly and time-consuming litigation or expensive licenses, which could harm our business.
 
There is considerable patent and other intellectual property development activity in the networking field and public Internet access industry. Our success depends, in part, upon our not infringing upon the intellectual property rights of others. Our competitors, as well as a number of other entities and individuals, own or claim to own intellectual property relating to our industry and may have substantially larger and broader patent portfolios than we do.  We expect that networking and public Internet access-related intellectual property, including ours, will be increasingly subject to third-party infringement claims as the number of competitors in our industry segment grows and the functionality of products and breadth of services in different industry segments expands and overlaps.
 
We have been named in a complaint by a competitor alleging that we and our customers are infringing on certain of its patents.
 
We believe we have meritorious defenses to these allegations.  Our counsel has contacted counsel for the other party to discuss these allegations.  Responding to and defending against claims may cause us to incur significant expense and divert the time and efforts of our management and employees. Successful assertion of such claims could require that we pay substantial damages or ongoing royalty payments, prevent us from selling our products and services, damage our reputation, or require that we comply with other unfavorable terms, any of which could materially harm our business. In addition, we may decide to pay substantial settlement costs in connection with any claim or litigation, whether or not successfully asserted.
 
Litigation with respect to intellectual property rights in the networking and Internet access industries is not uncommon and can often involve patent holding companies who have little or no product revenue and against whom our own patents may provide little or no deterrence.  As our customers increasingly demand that we indemnify them broadly from all damages and losses resulting from intellectual property litigation against them, we may also be obligated to indemnify our customers or business partners in connection with any such litigation, which could further exhaust our resources. Furthermore, as a result of an intellectual property challenge, we may be required to enter into royalty, license or other agreements. We may not be able to obtain these agreements on terms acceptable to us or at all. We may have to incur substantial cost in re-designing our products and services to avoid infringement claims. In addition, disputes regarding our intellectual property rights may dissuade potential customers from purchasing such products and services. As such, third-party claims with respect to intellectual property may reduce sales of our products and services, and may have a material and adverse effect on our business.

The market in which we compete is intensely competitive and actions by competitors could render our services less competitive, causing revenue and income to decline.

The ability to compete depends on a number of factors outside of our control, including:
 
24

 
§
the prices at which others offer competitive systems, including aggressive price competition and discounting on individual contracts, which may become increasingly prevalent due to worsening economic conditions;
§
the ability of competitors to undertake more extensive marketing campaigns;
§
the extent, if any, to which competitors develop proprietary offerings that improve their ability to compete;
§
the ability of our  customers to supply the solutions themselves; and
§
the extent of competitors' responsiveness to customer needs.

We may not be able to compete effectively on these or other factors.   If we are unable to compete effectively, market position, and therefore revenue and profitability, would decline.

The uncertain environment in the lodging industry and the economy will continue to impact our financial results and growth.

The present economic slowdown and the uncertainty over its breadth, depth and duration have left it unclear whether the lodging industry’s growth environment during the past few years will continue. Many economists have reported that the U.S. economy is in a recession. Recent substantial increases in transportation fuel costs, increases in air and ground travel costs and decreases in airline capacity that could stem from higher fuel costs, could also reduce demand for our customers’ hotel rooms which could result in lower demand for our solutions. Accordingly, our financial results and growth could be harmed if the economic slowdown continues for a significant period or becomes worse, or it transportation costs remain at current high levels for an extended period or increase further.

International business exposes our company to various foreign requirements, which could interfere with business or operations and could result in increased expenses and declining profitability.

International operations create special risks, including:

§
statutory requirements, which may impair our ability to expatriate foreign profits to help fund domestic operations;
§
greater difficulties in managing and supplying turnkey installation at foreign locations;
§
cultural differences that adversely affect utilization;
§
unexpected changes in trading policies, legal and regulatory requirements, tariffs and other foreign taxes;
§
greater difficulties in enforcing agreements with clients and collecting accounts receivable;
§
the tax system of foreign countries, which may tax our foreign income at higher rates than in the United States and may subject foreign earnings to withholding requirements or tariffs, exchange controls or other restrictions;
§
legal requirements and regulations of various foreign countries, which may make compliance by us with such laws and regulations difficult and may make enforcement of our intellectual property rights more difficult; and
§
fluctuations in currency exchange rates, which may affect demand for our products and services and may adversely affect the profitability in United States dollars of services provided by us in foreign markets where payment for its products and services is made in the local currency; and general economic conditions in the foreign countries into which we sell, which could have an adverse impact on its earnings from operations in those countries.
 
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If we and/or our product offerings fail to perform effectively, our reputation, and therefore our competitive position and financial performance, could be harmed.

Many of our new installation opportunities come from existing clients or from referrals by existing clients.   Therefore, growth is dependent on our reputation and on client satisfaction.   The failure to provide solutions or perform services that meet a client's expectations may damage our reputation and harm its ability to attract new business.   Damage to our reputation arising from client dissatisfaction could therefore harm financial performance.

The inability to protect intellectual property could harm our competitive position and financial performance.

Despite efforts to protect proprietary rights from unauthorized use or disclosure, parties, including former employees or consultants, may attempt to disclose, obtain or use our solutions or technologies.   The steps we have taken may not prevent misappropriation of solutions or technologies, particularly in foreign countries where laws or law enforcement practices may not protect proprietary rights as fully as in the United States.   Unauthorized disclosure of proprietary information could make our solutions and technologies available to others and harm our competitive position.

There are risks associated with our planned growth.

We have limited assets available to rely upon for adjusting to business variations and for growing new businesses. Should we look for new funding to assist in the acquisition of other profitable businesses, it is uncertain whether such funds will be available. If we are to grow and expand our operations, we will need to raise significant amounts of additional capital. There can be no assurance that we will be successful in raising a sufficient amount of additional capital, or if we are successful, that we will be able to raise capital on reasonable terms. If we do raise additional capital, our existing shareholders may incur substantial and immediate dilution.

The sales cycle for our products is lengthy and unpredictable.

The sales cycle between an initial customer contact and execution of a contract or license agreement with a customer, or purchase of our products, can vary widely. Initially, we must educate our customers about the potential applications and benefits association with our products. In addition, changes in our customers’ budgets, or the priority they assign to control network administration and development could also affect the sales cycle.

Due to our foreign client installations in Canada, the Caribbean and Europe, we are exposed to transaction adjustments with respect to foreign currency.

Our functional currency is the United States dollar. However, our operating functional currency is the Canadian Dollar. Under United States dollar functional currency, the financial statements of foreign subsidiaries are re-measured from the recording currency to the United States dollar.   The resulting re-measurement adjustment has been recorded as separate component of stockholder’s equity. We believe that operating under United States dollar functional currency, combined with transacting business in countries with traditionally stable currencies mitigates the effect of any near-term foreign currency transaction adjustments on our financial position, results of operations and cash flows.
 
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We have not engaged in foreign currency hedging transactions nor do we have any derivative financial instruments.  However, going forward, we will assess the need to enter into hedging transactions to limit its risk due to fluctuations in exchange rates.

Risks Relating To Our Common Stock:

There is a limited market for our common stock.

Our common stock is traded in the Over-the-Counter Bulletin Board market.  This may cause delays in the timing of transactions, reductions in the number and quality of securities analysts' reporting on us, and the extent of our coverage in the media.  Trading in our common stock has been sporadic, and at present, there is a limited market for it.  There can be no assurance that a stronger market will develop.  Even if such a market does develop, it may not be sustained.

Shareholders may suffer dilution upon the exercise of outstanding options.

As of January 31, 2010, we had exercisable stock options outstanding to purchase 13,852,356 shares of common stock.  To the extent such options are exercised there will be further dilution. In addition, in the event that any future financing should be in the form of securities convertible into, or exchangeable for, equity securities, investors may experience additional dilution upon the conversion or exchange of such securities.
 
Future sales of our common stock by existing shareholders under Rule 144 could decrease the trading price of our common stock.

As of January 31, 2010, a total of 10,299,344 shares of our outstanding common stock were "restricted securities" and could be sold in the public markets only in compliance with Rule 144 adopted under the Securities Act of 1933 or other applicable exemptions from registration. As of February 15, 2008, Rule 144 was amended to provide that a person who is not affiliated with the issuer, holding restricted securities for a period of six months may thereafter sell those securities, if the issuer is current with its reporting requirements. Persons who are not affiliated with the issuer and who have held their restricted securities for at least one year are not subject to any limitations. Possible or actual sales of our common stock by present shareholders under Rule 144 could have a depressive effect on the price of our common stock.

Our common stock is subject to "penny stock" rules.

Our common stock is classified as a penny stock by the Securities and Exchange Commission. This classification severely and adversely affects the market liquidity for our common stock. The Commission has adopted Rule 15g-9, which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person's account for transactions in penny stocks; and (ii) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must (i) obtain financial information and investment experience objectives of the person; and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight form, sets forth (i) the basis on which the broker or dealer made the suitability determination and (ii) that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stocks in public offerings and secondary trading and about the commissions payable to the broker-dealer and registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
 
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ITEM 4. CONTROLS AND PROCEDURES

Our Chief Executive Officer and the Chief Financial Officer performed an evaluation of the effectiveness of our disclosure controls and procedures, which have been designed to permit us to effectively identify and timely disclose important information.  In designing and evaluating the disclosure controls and procedures, Management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and Management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the controls and procedures were effective as of January 31, 2010 to ensure that material information was accumulated and communicated to our Management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

During the quarter ended January 31, 2010, we have made no change in our internal controls over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

On November 17, 2009 the Company was named as a defendant by Nomadix, Inc. in a complaint for patent infringement of certain U.S. patents.  The matter is early in its process and it is not possible to reasonably determine the outcome of this complaint. The Company has been monitoring this situation closely and believes it has meritorious defenses to the claims. Accordingly, it is not possible, to assess whether or not the Company needs to reserve for a potential settlement.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. None

Item 3. Defaults Upon Senior Securities. None
 
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Item 4. Submission of Matters to a Vote of Security Holders. None

Item 5. Other Information. None.

Item 6. Exhibits and Reports On Form 8-K.

(a)  Exhibits

31.1  Certificate of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934*

31.2  Certificate of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934*

32.1  Certificate of Chief Executive Officer pursuant to 18 U.S.C. Section 1350*

32.2  Certificate of Chief Financial Officer pursuant to 18 U.S.C. Section 1350*

(b) Reports on Form 8-K

On January 14, 2010, the company filed form 8-K with the SEC reporting our results of operations for the year ended October 31, 2009.

On November 23, 2009, the company filed form 8-K with the SEC disclosing that the Company had been a named defendant by Nomadix, Inc.

* Filed herewith.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
Date: March 12, 2010
Superclick, Inc.
 
/s/ Sandro Natale
 
Name: Sandro Natale
 
Title: President & CEO
 
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