UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Under Section 13 or 15(d) Of The Securities Exchange Act
of 1934
For the Quarterly Period ended April 30, 2009
[ ] Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of
1934
For the transition period __________ to __________
Commission file number 000-52980
Propalms, Inc.
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(Exact name of small business issuer as specified in its charter)
Nevada 22-3351399
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Unit 4, Park Farm Courtyard, Easthorpe, Malton,
N. Yorkshire, United Kingdom Y017 6QX
----------------------------------------
(Address of principal executive offices)
011-44-1653-696060
-------------------------
(Issuer's telephone number)
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 [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [ ] No [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: 487,845,650 shares of $0.001 par value
common stock outstanding as of May 31, 2009.
PROPALMS INC.
QUARTER ENDED April 30, 2009
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements 4
Consolidated Balance Sheets as of April 30, 2009 (unaudited)and
January 31, 2009 4
Consolidated Statements of Operations for the three months
ended April 30, 2009 and 2008 (unaudited) 5
Consolidated Statements of Cash Flows for the three months
ended April 30, 2009 and 2008 (unaudited) 6
Notes to Financial Statements (unaudited) 7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations and Risk Factors. 19
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 23
ITEM 4. Controls and Procedures 23
PART II. OTHER INFORMATION 24
ITEM 1. Legal Proceedings 24
ITEM 2. Changes in Securities 24
ITEM 3. Defaults upon Senior Securities 24
ITEM 4. Submission of Matters to a Vote of Security Holders 24
ITEM 5. Other Information 24
ITEM 6. Exhibits and Reports on Form 8-K 24
2
FORWARD LOOKING STATEMENT INFORMATION
Certain statements made in this Form 10Q are forward looking statements made in
reliance upon the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 regarding the plans and objectives of management for future
operations. Such statements may relate to, but are not limited to, information
or assumptions about known and unknown risks, sales (including pricing),
income/(loss), earnings per share, operating income or gross margin
improvements, return on equity, return on invested capital, capital
expenditures, working capital, cash flow, dividends, capital structure, debt to
capitalization ratios, interest rates, internal growth rates, restructuring,
impairment and other charges, potential losses on divestitures, impact of
changes in accounting standards, pending legal proceedings and claims (including
environmental matters), future economic performance, costs and cost savings
(including raw material inflation, productivity and streamlining), synergies,
management's plans, goals and objectives for future operations, performance and
growth or the assumptions relating to any of the forward looking statements.
These statements generally are accompanied by words such as "intend,"
"anticipate," "believe," "estimate," "project," "target," "plan," "expect,"
"will," "should," "would" or similar statements. The Company cautions that
forward looking statements are not guarantees because there are inherent
difficulties in predicting future results. Actual results could differ
materially from those expressed or implied in the forward looking statements.
Factors that could cause actual results to differ include, but are not limited
to, those matters set forth in this 10-Q. Some of these factors are described as
criteria for success. The Company"s failure to achieve, or limited success in
achieving, these objectives could result in actual results differing materially
from those expressed or implied in the forward looking statements. In addition,
there can be no assurance that the Company has correctly identified and assessed
all of the factors affecting the Company or that the publicly available and
other information the Company receives with respect to these factors is complete
or correct.
3
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
PROPALMS INC.
CONSOLIDATED BALANCE SHEETS
AS OF APRIL 30, 2009 AND JANUARY 31, 2009
(Unaudited)
April-09 January-09
------------ ------------
ASSETS
CURRENT ASSETS
Cash & cash equivalents $ 12,665 $ 7,622
Accounts receivable, net 131,336 148,698
Prepaid expenses & other current assets 25,724 27,227
------------ ------------
Total current assets 169,725 183,548
PROPERTY, PLANT & EQUIPMENT, net 11,205 12,876
INTANGIBLE ASSETS, net 399,586 415,982
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TOTAL ASSETS $ 580,516 $ 612,406
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 973,836 $ 784,843
Deferred revenue 513,223 46,470
Related party payable 126,198 184,116
Loans payable- officer 10,831 --
Notes payable 801,232 801,232
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Total current liabilities 2,425,320 1,816,662
LONG TERM LIABILITIES
Notes payable 53,371 54,205
Deferred revenue 73,427 459,899
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Total long term liabilities 126,798 514,104
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2,552,118 2,330,766
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COMMITMENTS & CONTINGENCIES -- --
STOCKHOLDERS' DEFICIT
Common stock, $0.0001 par value; Authorized shares 500,000,000,
487,845,650 shares issued and outstanding as of April 30, 2009
497,845,650 shares issued and outstanding as of January 31, 2009 48,785 49,785
Additional paid in capital 6,336,272 6,266,272
Comprehensive gain 121,142 123,579
Accumulated deficit (8,477,800) (8,157,995)
------------ ------------
Total stockholders' deficit (1,971,601) (1,718,360)
------------ ------------
TOTAL LIABILITIES & STOCKHOLDER DEFICIT $ 580,516 $ 612,406
============ ============
4
PROPALMS INC
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED APRIL 30, 2009 AND 2008
(Unaudited)
2009 2008
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Revenue, net $ 205,821 $ 235,046
Cost of Goods Sold 80,696 180,218
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Gross profit 125,125 54,827
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Operating Expenses:
Research & Development 66,248 60,258
Sales & Marketing 117,718 115,105
General and administrative expenses 252,489 569,109
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Total operating expenses 436,455 744,472
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Total Loss From Operations (311,330) (689,645)
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Other Income (Expense):
Other income (expense) 6,005 (545)
Interest expense (14,479) (21,324)
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Total other expense (8,474) (21,869)
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Net Loss $ (319,805) $ (711,514)
Other comprehensive income
Foreign currency translation (2,437) 14,373
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Comprehensive Loss $ (322,242) $ (697,141)
============= =============
Basic & diluted loss per share (0.00) (0.00)
============= =============
Weighted average shares for computing basic & diluted
loss per share 491,216,437 332,383,670
============= =============
Weighted average for the dilutive shares has not been calculated since the
dilutive shares are anti-dilutive
5
PROPALMS INC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTH PERIODS ENDED APRIL 30, 2009 AND 2008
(Unaudited)
2009 2008
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (319,805) $ (711,514)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 29,829 64,949
Stock issued/to be issued for services -- 188,000
Provision for bad debt 24,255 --
Amortization of prepaid consulting -- 201,000
Options expense 69,000 69,000
(Increase) decrease in current assets:
Receivables (8,048) (16,203)
Prepayments 7,274 1,487
Increase in current liabilities:
Accounts payable and accrued expenses 189,220 83,181
Deferred income 64,527 10,764
------------ ------------
Net cash provided by (used in) operating
activities (56,254) (109,336)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property & equipment -- (5,213)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of note payable --
Proceeds from notes payable 10,970 14,817
(Payments on)/proceeds from loans payable - officer 10,632 (60,674)
Proceeds from issuance of shares for cash 185,626
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Net cash provided by financing activities 21,602 139,770
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Effect of exchange rate on cash & cash equivalents (72,814) (3,118)
NET INCREASE IN CASH & CASH EQUIVALENTS 5,043 22,103
CASH & CASH EQUIVALENTS, BEGINNING BALANCE 7,622 25,107
------------ ------------
CASH & CASH EQUIVALENTS, ENDING BALANCE $ 12,665 $ 47,210
============ ============
Supplementary Information:
Cash paid during the year for:
Interest $ 753 $ 15,886
============ ============
Income taxes $ -- $ --
============ ============
6
PROPALMS, INC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Business
Propalms, Inc. (the "Company"), formerly Jenna Lane, Inc. (Jenna Lane), was
incorporated in 1995 under the laws of the State of Delaware. Propalms, Ltd was
a UK registered company incorporated in October 2001 with a fiscal year end of
January 31. On July 12, 2005 Propalms, Ltd purchased from Tarantella, Inc. a
license and purchase option agreement for the world wide intellectual property
rights, including the entire customer base and all the ongoing maintenance
revenue, of a software product called Terminal Services Edition ("TSE"). Jenna
Lane was a Delaware Corporation, incorporated in 1995. Jenna Lane was a
non-operating company. On December 8, 2006, shareholders of Propalms, Ltd
purchased 13,750,000 shares of Jenna Lane. On December 9, 2006, Jenna Lane
entered into an agreement with all the shareholders of Propalms Ltd to exchange
230,000,000 shares of Jenna Lane for all the issued and outstanding stock of
Propalms, Ltd. After the consummation of the agreement, the former shareholders
of Propalms, Ltd. own 243,750,000 shares of common stock of Jenna Lane, which
represent 89.35% of Jenna Lane's outstanding shares.
The exchange of shares with Propalms, Ltd has been accounted for as a reverse
acquisition under the purchase method of accounting since the shareholders of
the Propalms, Ltd. obtained control of the consolidated entity. Accordingly, the
merger of the two companies has been recorded as a recapitalization of Propalms,
Ltd, with Propalms, Ltd being treated as the continuing entity. The historical
financial statements presented are those of Propalms, Ltd. The continuing
company has retained January 31 as its fiscal year end. The financial statements
of the legal acquirer are not significant; therefore, no pro forma financial
information is submitted.
The consolidated financial statements include the accounts of Propalms, Inc. and
its wholly owned subsidiary, Propalms, Ltd. All significant intercompany
accounts and transactions have been eliminated in consolidation.
During December 2006 Jenna Lane increased its authorized common shares to
500,000,000 in order to acquire Propalms, Ltd. Jenna Lane moved from Delaware a
and was reincorporated in Nevada.
In March 2007 Jenna Lane, Inc. changed its name to Propalms USA, Inc. and its
ticker symbol to PRPM.PK in order to better reflect the nature of the Company's
business. As a result of this recapitalization and reorganization, the financial
statements of the Company reflect the results of operations beginning on July
12, 2005 (since "Inception"). Further, on June 22, 2007 Propalms USA, Inc.
changed its name to Propalms, Inc. to better reflect the Company's international
sales and global presence.
In October 2008 Propalms, Inc. received from FINRA clearance to begin quotations
on the OTC Bulletin Board, and its ticker symbol changed to PRPM.OB
Propalms Inc., through Propalms, Ltd., develops TSE which offers users a systems
management product for the Microsoft server based computing (SBC) environment.
TSE allows users to manage and operate all their software applications centrally
on their servers rather than on each individual desktop computer. The Company
markets and licenses its products through multiple channels such as value-added
resellers and channel distributors.
7
PROPALMS, INC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Summary of Significant Accounting Policies
Unaudited Interim Financial Statements
The accompanying unaudited consolidated financial statements have been prepared
by Propalms, Inc., pursuant to the rules and regulations of the Securities and
Exchange Commission (the "SEC") Form 10-Q and Item 310 of Regulation S-B, and
generally accepted accounting principles for interim financial reporting. The
information furnished herein reflects all adjustments (consisting of normal
recurring accruals and adjustments) which are, in the opinion of management,
necessary to fairly present the operating results for the respective periods.
Certain information and footnote disclosures normally present in annual
consolidated financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been omitted
pursuant to such rules and regulations. These consolidated financial statements
should be read in conjunction with the audited consolidated financial statements
and footnotes included in the Company's Annual Report on Form 10-K. The results
of the three month period ended April 30, 2009 are not necessarily indicative of
the results to be expected for the full year ending January 31, 2010.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America. The Company's functional currency is the Great Britain Pound (GBP);
however the accompanying consolidated financial statements have been translated
and presented in United States Dollars ($).
Foreign currency transaction and comprehensive income (loss)
As of April 30, 2009, the accounts of Propalms, Ltd were maintained, and its
financial statements were expressed, in Great Britain Pound (GBP). Such
financial statements were translated into U.S. Dollars (USD) in accordance with
Statement of Financial Accounts Standards ("SFAS") No. 52, "Foreign Currency
Translation," with the GBP as the functional currency. According to the
Statement, all assets and liabilities were translated at the current exchange
rate, stockholder's equity are translated at the historical rates and income
statement items are translated at the average exchange rate for the period. The
resulting translation adjustments are reported under other comprehensive income
in accordance with SFAS No. 130, "Reporting Comprehensive Income" as a component
of shareholders' equity.
Use of Estimates
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
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.
8
PROPALMS, INC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Principles of Consolidation
The consolidated financial statements include the accounts of Propalms, Inc. and
its wholly owned subsidiary Propalms, Ltd, collectively referred to within as
the Company. All material inter-company accounts and transactions have been
eliminated in consolidation.
Cash and Cash Equivalents
For purposes of the cash flow statements, the Company considers all highly
liquid investments with original maturities of three months or less at the time
of purchase to be cash equivalents.
Accounts Receivable
The Company's customer base consists of a geographically dispersed customer
base. The Company maintains reserves for potential credit losses on accounts
receivable. Management reviews the composition of accounts receivable and
analyzes historical bad debts, customer concentrations, customer credit
worthiness, current economic trends and changes in customer payment patterns to
evaluate the adequacy of these reserves. Reserves are recorded primarily on a
specific identification basis.
Property and Equipment
Property and equipment are stated at cost. Expenditures for maintenance and
repairs are charged to earnings as incurred; additions, renewals and betterments
are capitalized. When property and equipment are retired or otherwise disposed
of, the related cost and accumulated depreciation are removed from the
respective accounts, and any gain or loss is included in operations.
Depreciation is computed using straight line method over the estimated useful
lives of the assets, which is four years. Depreciation expense was $2,004 and
$1,235 for the three month periods ended April 30, 2009 and 2008, respectively.
The Company accounts for the costs of computer software developed or obtained
for internal use in accordance with Statement of Position 98-5, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use." The
Company capitalizes costs of materials, consultants, and payroll and payroll
related costs for employees incurred in developing internal use computer
software. These costs are included with "Computer equipment and software." Costs
incurred during the preliminary project and post implementation stages are
charged to general and administrative expense.
Intangible Assets
Intangible assets consist of product licenses, renewals, distributor
relationships and goodwill. The Company evaluates intangible assets, goodwill
and other long-lived assets for impairment, at least on an annual basis and
9
PROPALMS, INC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable from its estimated future cash flows. Recoverability of
intangible assets, other long-lived assets and, goodwill is measured by
comparing their net book value to the related projected undiscounted cash flows
from these assets, considering a number of factors including past operating
results, budgets, economic projections, market trends and product development
cycles. If the net book value of the asset exceeds the related undiscounted cash
flows, the asset is considered impaired, and a second test is performed to
measure the amount of impairment loss. Potential impairment of goodwill is being
evaluated in accordance with SFAS No. 142. As part of intangible assets, the
Company capitalizes certain computer software development costs in accordance
with SFAS No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed." Costs incurred internally to create a computer
software product or to develop an enhancement to an existing product are charged
to expense when incurred as research and development expense until technological
feasibility for the respective product is established. Thereafter, all software
development costs are capitalized and reported at the lower of unamortized cost
or net realizable value. Capitalization ceases when the product or enhancement
is available for general release to customers.
The Company makes on-going evaluations of the recoverability of its capitalized
software projects by comparing the amount capitalized for each product to the
estimated net realizable value of the product. If such evaluations indicate that
the unamortized software development costs exceed the net realizable value, the
Company writes off the amount which the unamortized software development costs
exceed net realizable value. Capitalized and purchased computer software
development costs are being amortized ratably based on the projected revenue
associated with the related software or on a straight line basis over three
years, whichever method results in a higher level of amortization.
Revenue Recognition
The Company recognizes its revenue in accordance with the Securities and
Exchange Commissions ("SEC") Staff Accounting Bulletin No. 104, "Revenue
Recognition" ("SAB 104") and The American Institute of Certified Public
Accountants ("AICPA") Statement of Position ("SOP") 97-2, "Software Revenue
Recognition," as amended by SOP 98-4 and SOP 98-9, SOP 81-1, "Accounting for
Performance of Construction-Type and Certain Production-Type Contracts," and
Accounting Research Bulletin 45 (ARB 45) "Long-Term Construction Type
Contracts." The Company's revenue recognition policy is as follows: License
Revenue: The Company recognizes revenue from license contracts without major
customization when a non-cancelable, non-contingent license agreement has been
signed, delivery of the software has occurred, the fee is fixed or determinable,
and collectibilty is probable. Revenue from the sale of licenses with major
customization, modification, and development is recognized on a percentage of
completion method, in conformity with ARB 45 and SOP 81-1. Revenue from the
implementation of software is recognized on a percentage of completion method,
in conformity with Accounting Research Bulletin ("ARB") No. 45 and SOP 81-1. Any
revenues from software arrangements with multiple elements are allocated to each
element of the arrangement based on the relative fair values using vendor
specific objective evidence as defined in the SOPs. An output measure of "Unit
of Work Completed" is used to determine the percentage of completion which
measures the results achieved at a specific date. Units completed are certified
by the Project Manager and EVP IT/ Operations.
10
PROPALMS, INC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Services Revenue: Revenue from consulting services is recognized as the services
are performed for time and materials contracts. Revenue from training and
development services is recognized as the services are performed. Revenue from
maintenance agreements is recognized ratably over the term of the maintenance
agreement, which in most instances is one to two years.
The Company markets and licenses its products, TSE, primarily through indirect
channels such as value-added resellers and channel distributors. The product
license is perpetual and includes either one to two years of maintenance.
Maintenance includes enhancements and unspecified software upgrades.
Fair Value
Statement of financial accounting standard No. 107, Disclosures about fair value
of financial instruments, requires that the Company disclose estimated fair
values of financial instruments. The carrying amounts reported in the statements
of financial position for assets and liabilities qualifying as financial
instruments are a reasonable estimate of fair value.
Basic and Diluted Earnings Per Share
Earnings per share are calculated in accordance with the Statement of Financial
Accounting Standards No. 128 (SFAS No. 128), "Earnings per share". SFAS No. 128
superseded Accounting Principles Board Opinion No.15 (APB 15). Net income (loss)
per share for all periods presented has been restated to reflect the adoption of
SFAS No. 128. Basic net income (loss) per share is based upon the weighted
average number of common shares outstanding. Diluted net loss per share is based
on the assumption that all dilutive convertible shares and stock options were
converted or exercised. Dilution is computed by applying the treasury stock
method. Under this method, options and warrants are assumed to be exercised at
the beginning of the period (or at the time of issuance, if later), and as if
funds obtained thereby were used to purchase common stock at the average market
price during the period. Basic and diluted loss per share were $0.00 and $0.00
for the three month periods ended April 30, 2009 and 2008 respectively.
Stock-based compensation
In December 2004, the FASB issued SFAS No. 123 (Revised 2004), "Share-Based
Payment" ("SFAS 123R"), which requires the measurement of all employee
share-based payments to employees, including grants of employee stock options,
using a fair value based method and the recording of such expense in the
consolidated statements of operations. In March 2005, the SEC issued Staff
Accounting Bulletin No. 107 ("SAB 107") regarding the SEC's interpretation of
SFAS 123R and the valuation of share-based payments for public companies. The
Company adopted SFAS 123R and related FASB Staff Positions ("FSPs") as of
February 1, 2006 and recognized stock-based compensation expense using the
modified prospective method.
11
PROPALMS, INC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Going Concern
The accompanying consolidated financial statements have been prepared on a going
concern basis which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As shown in the consolidated
financial statements, during the three month periods ended April 30, 2009 and
2008,the Company incurred net losses of $319,805 and $711,514, respectively. In
addition, the Company had accumulated deficit was $8,477,800 as of April 30,
2009. If the Company is unable to generate profits and is unable to continue to
obtain financing for its working capital requirements, it may have to curtail
its business sharply or cease business altogether.
The Company has taken certain restructuring steps to provide the necessary
capital to continue its operations. These steps included, but were not limited
to: 1) focus on sales to minimize the need for capital at this stage; 2)
financial restructuring by converting part of the outstanding accounts payable
to equity; 3) raising equity financing; 4) continuous focus on reductions in
cost where possible.
Recent Accounting Pronouncements:
In May of 2008, FSAB issued SFASB No.162, The Hierarchy of Generally Accepted
Accounting Principles. The pronouncement mandates the GAAP hierarchy reside in
the accounting literature as opposed to the audit literature. This has the
practical impact of elevating FASB Statements of Financial Accounting Concepts
in the GAAP hierarchy. This pronouncement will become effective 60 days
following SEC approval. The company does not believe this pronouncement will
impact its financial statements.
In May 2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee
Insurance Contracts, an interpretation of FASB Statement No. 60." The scope of
this Statement is limited to financial guarantee insurance (and reinsurance)
contracts, as described in this Statement, issued by enterprises included within
the scope of Statement 60. Accordingly, this Statement does not apply to
financial guarantee contracts issued by enterprises excluded from the scope of
Statement 60 or to some insurance contracts that seem similar to financial
guarantee insurance contracts issued by insurance enterprises (such as mortgage
guaranty insurance or credit insurance on trade receivables). This Statement
also does not apply to financial guarantee insurance contracts that are
derivative instruments included within the scope of FASB Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This Statement
will not have an impact on the Company's financial statements
On December 30, 2008 FASB issued FIN 48-3, "Effective Date of FASB
Interpretation No. 48 for Certain Nonpublic Enterprises". This FSP defers the
effective date of FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes, for certain non-public enterprises as defined in paragraph 289, as
12
PROPALMS, INC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
amended, of FASB Statement No. 109, Accounting for Income Taxes, including
non-public not-for-profit organizations. However, non-public consolidated
entities of public enterprises that apply U. S. GAAP are not eligible for the
deferral. Nonpublic enterprises that have applied the recognition, measurement,
and disclosure provisions of Interpretation 48 in a full set of annual financial
statements issued prior to the issuance of this FSP also are not eligible for
the deferral. This FSP shall be effective upon issuance. The Company does not
believe this pronouncement will impact its financial statements.
In April 2009, the FASB issued FSP No. FAS 157-4, "Determining Fair Values When
the Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly." This FSP provides
guidance on (1) estimating the fair value of an asset or liability when the
volume and level of activity for the asset or liability have significantly
declined and (2) identifying transactions that are not orderly. The FSP also
amends certain disclosure provisions of SFAS No. 157 to require, among other
things, disclosures in interim periods of the inputs and valuation techniques
used to measure fair value. This pronouncement is effective prospectively
beginning April 1, 2009. The Company is currently evaluating the impact of this
standard, but would not expect it to have a material impact on the Company's
consolidated results of operations or financial condition.
In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, "Recognition and
Presentation of Other-Than-Temporary Impairments" (FSP 115-2). This FSP modifies
the requirements for recognizing other-than-temporarily impaired debt securities
and changes the existing impairment model for such securities. The FSP also
requires additional disclosures for both annual and interim periods with respect
to both debt and equity securities. Under the FSP, impairment of debt securities
will be considered other-than-temporary if an entity (1) intends to sell the
security, (2) more likely than not will be required to sell the security before
recovering its cost, or (3) does not expect to recover the security's entire
amortized cost basis (even if the entity does not intend to sell). The FSP
further indicates that, depending on which of the above factor(s) causes the
impairment to be considered other-than-temporary, (1) the entire shortfall of
the security's fair value versus its amortized cost basis or (2) only the credit
loss portion would be recognized in earnings while the remaining shortfall (if
any) would be recorded in other comprehensive income. FSP 115-2 requires
entities to initially apply the provisions of the standard to previously
other-than-temporarily impaired debt securities existing as of the date of
initial adoption by making a cumulative-effect adjustment to the opening balance
of retained earnings in the period of adoption. The cumulative-effect adjustment
potentially reclassifies the noncredit portion of a previously
other-than-temporarily impaired debt security held as of the date of initial
adoption from retained earnings to accumulated other comprehensive income. This
pronouncement is effective April 1, 2009. The Company is currently evaluating
the impact of this standard, but would not expect it to have a material impact
on the Company's consolidated results of operations or financial condition.
13
PROPALMS, INC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, "Interim
Disclosures about Fair Value of Financial Instruments." This FSP essentially
expands the disclosure about fair value of financial instruments that were
previously required only annually to also be required for interim period
reporting. In addition, the FSP requires certain additional disclosures
regarding the methods and significant assumptions used to estimate the fair
value of financial instruments. These additional disclosures will be required
beginning with the quarter ending June 30, 2009. The Company is currently
evaluating the requirements of these additional disclosures.
Reclassifications
Certain reclassifications have been made to the 2008 financial statements to
conform to the 2009 presentation.
Note 3. Intangible Assets
Intangible assets consist of acquired developed software technology, acquired
customer relationship, and capitalized software development costs.
The components of intangible assets at April 30, 2009 and January 31, 2009 are
summarized as follows:
April 30 January 31 Est. Life
------------ ------------ ------------
Developed Software Technology $ 564,276 $ 485,672 5 years
Customer Relationships 334,349 324,853 10 years
Software Development Costs 100,139 159,874 2 years
Less: Accumulated Amortization (599,179) (554,893)
------------ ------------
Net intangible assets $ 399,586 $ 415,982
============ ============
The developed software technology and software development costs are being
amortized to cost of revenues. The value of the customer relationships is being
amortized to Sales and Marketing expense. The amortization for the three month
periods ended April 30, 2009 and 2008 amounted to $27,825 and $63,715,
respectively.
The amortization schedule for the next five years ending April 30, is as
follows:
2010 $ 133,409
2011 33,435
2012 33,435
2013 33,435
2014 33,435
------------
$ 267,148
============
14
PROPALMS, INC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Accounts payable & accrued expenses
The accounts payable and accrued expenses as of April 30, 2009 and January 31,
2009 comprised of the following:
April 30 January 31
------------ ------------
Trade creditors $ 358,064 $ 265,834
Accrued expenses 106,440 106,511
Accrued payroll taxes 147,583 95,750
Accrued payroll 361,749 301,759
------------ ------------
Total $ 973,836 $ 784,843
============ ============
Note 5. Debt
To finance the acquisition of the assets and liabilities related to the TSE
server product in July 2005, the Company made a initial cash payment of $100,000
and agreed to make payments to the seller over a scheduled 30-month period, for
a total of $900,000. The agreement calls for quarterly payments of $50,000, with
the initial payment due October 2005, until December 2007, at which time the
remaining balance was due and payable. The note is non-interest bearing. In
recording this liability, the Company imputed approximately $135,000 of interest
using a rate of 8%. At December 31, 2007, the parties extended the length of the
agreement and leaving the quarterly payment obligation of $50,000 unchanged.
At April 30, 2009, the note is in default and the remaining obligation owed to
the seller was $760,000. The Company has also accrued interest on this note and
included it in the accrued liabilities in the accompanying financials. This note
has been presented as a current liability in the accompanying balance sheet.
On July 10, 2006 the Company received working capital loan financing from HSBC
Plc. Interest is charged on a monthly basis and repayments of principal and
interest are made monthly. The total principal outstanding at January 31, 2009
was $95,437. The loan is repayable over a ten year period beginning three months
from July 2006 in fixed monthly installments of $3,436 per month inclusive of
interest. $41,232 of the balance is presented as a current liability and $53,371
is presented as a long term liability in the accompanying financial statements.
Interest is at 2.2% margin over the bank's base rate.
The maturity schedule of the loan over the next five years ending April 30 is as
follows:
2010 $ 41,232
2011 $ 41,232
2012 $ 12,139
15
PROPALMS, INC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Deferred Revenue
The Company recognizes as deferred revenue, payments received before all
relevant criteria for revenue recognition are satisfied. The Company renders
maintenance services which often extend over a period of more than one year and
the revenue pertaining to the period after one year is presented as long term
liability. As of January 31, 2009, the current portion of deferred revenue
amounted to $46,470 and the long term portion amounted to $459,899. As of April
30, 2009, the current portion of deferred revenue amounted to $513,223 and the
long term portion amounted to $73,427.
Note 7. Stockholders Deficit
During the three month period ended April 30, 2009, the President & CEO
voluntarily surrendered 10 million shares held by them. The Board authorized to
cancel these shares.
During the year ended January 31, 2009, the Company issued 4,700,000 shares to
an independent outside contractor. These shares were valued at the fair market
value of $188,000, pursuant to EITF 96-18.
During the year ended January 31, 2009, the Company raised $485,626 cash, net of
finders' fee, by issuing 41,813,146 shares. The shares were issued out of the
escrow account maintained by the investor relations firm.
The Company issued 81,090,560 shares during the year ended January 31, 2009 for
the part payment of accrued compensation of the President & CEO of the Company.
These shares were valued at the fair market value of $561,951, pursuant to EITF
96-18.
The Company agreed to issue the investor relations firm 18,000,000 shares as its
fee for the year ended January 31, 2007, pursuant to the agreement. As of
January 31, 2008, they were recorded as shares to be issued. The shares were
issued during the year ended January 31, 2009. These shares were valued at the
fair market value of $990,000 pursuant to EITF 96-18.
The Company agreed to issue the investor relations firm 5,000,000 shares as
prepaid fee for the period from January 1, 2009 to May 31, 2009, pursuant to the
agreement. The Company terminated the agreement with the firm in February 2009
and the whole amount was expensed to consulting services for the year. These
shares were valued at the fair market value of $100,000 pursuant to EITF 96-18.
The Company also issued the investor relations firm 18,406,559 shares as fee for
the year ended January 31, 2009. The Company terminated the agreement with the
firm in February 2009 and the whole amount was expensed to consulting services
for the year. These shares were valued at the fair market value of $165,659
pursuant to EITF 96-18.
Note 8. Loans Payable- Officer
As of April 30, 2009, the Company had payables of $10,831 to officers of the
Company for loans raised for working capital. These loans are non-interest
bearing, unsecured and due on demand.
16
PROPALMS, INC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 9. Stock Options
During the year ended January 31, 2008, the Company granted ten million options
each to the CEO and President as part of the Equity Compensation Plan. The
options have an exercise price of $0.05 and will expire on January 11, 2018. The
options vest over a five year period at the rate of 2 million options at the end
of each year. The options were valued at $1,380,000 on the date of grant
pursuant to the black scholes option pricing model. The expense for the options
is being recorded pursuant to SFAS 123R. During the three month periods ended
April 30, 2009 and 2008, the Company recorded expense of $69,000 and $69,000.
The following assumptions have been used:
Risk-free interest rate 2.12% - 4.13%
Expected life of the options 2-10 year
Expected volatility 305%
Expected dividend yield 0%
A summary of the status of the plan is presented below:
Aggregate
Weighted Intrinsic
Total Price Value
------------ ------------ ------------
Outstanding,
January 31, 2009 29,500,000 $ 0.06 --
Granted -- -- --
Cancelled -- -- --
Exercised -- -- --
------------ ------------ ------------
Outstanding,
April 30, 2009 29,500,000 $ 0.06 --
============ ============ ============
Options outstanding at April 30, 2009 and related weighted average price and
intrinsic value are as follows:
Weighted Total
Average Weighted Weighted
Total Remaining Average Average Aggregate
Exercise Options Life Exercise Options Exercise Intrinsic
Prices Outstanding (Years) Price Exercisable Price Value
---------- ------------ ------------ ------------ ------------ ------------ ------------
$0.05-0.10 29,500,000 7.20 $ 0.06 17,500,000 $ 0.06 --
Note 10. Related Party transactions
The Company has contracted certain development activity with India based Aloha
Technologies, a related party. Mr. Nakul Sood is the the Managing Director of
Aloha Technologies as well as a Director of the Company. All development work is
17
PROPALMS, INC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
performed by Aloha Technologies on a work for hire basis and the Company owns
all rights title and interest in any work developed by Aloha Technologies.
During the three month period ended April 30, 2009, the Company contracted
services worth $70,612. As of April 30, 2009 the payable amounted to $126,198.
The Company has executive agreements with each of the President and the CEO of
the Company for an annual salary of $65,000 per annum. From October 27, 2008,
the salary was increased to $120,000 per annum as the Company became registered
on the Bulletin Board. These agreements can be cancelled when the executives
reach the age of 65 years or after giving six (6) months notice.
On August 1, 2008 the Company extended the executive agreement with each of the
President and the CEO for a period of three years. The purpose was to provide a
commitment and long term stability to the growth of the Company.
The Company agreed to pay the President and the CEO the sum of $400,000 each for
this extension. The President and CEO have agreed to accept this payment in
either cash or restricted stock. The company issued 81,090,560 free trading
shares during the year ended January 31, 2009 for the part payment of accrued
compensation of the President & CEO of the Company. These shares were valued at
the fair market value of $561,951, pursuant to EITF 96-18.
Note 11. Commitments and Contingencies
At April 30, 2009 there were no material commitments or contingencies. The
Company leases office spare in the United Kingdom on a three year lease. This
lease is accounted for as an operating lease. Rental expense for this lease
consisted of approximately $26,104 for the three month period ended April 30,
2009. The rent commitment for the next three years ended April 30 is as follows:
2010 $ 6,682
2011 29,850
2012 29,850
The Company also has executive agreements with each of the President and the CEO
of the Company for an annual salary of $120,000 per annum. These agreements can
be cancelled when the executives reach the age of 65 years or after giving six
(6) months notice.
18
ITEM 2. Management's Discussion and Analysis.
Forward-Looking Statements
--------------------------
The following discussion of the financial condition and results of operation of
the Company for the three month periods ended April 30, 2009 and 2008 should be
read in conjunction with the selected consolidated financial data, the financial
statements and the notes to those statements that are included elsewhere in this
Current Report on Form 10-Q ("Form 10-Q"). Our discussion includes
forward-looking statements based upon current expectations that involve risks
and uncertainties, such as our plans, objectives, expectations and intentions.
Actual results and the timing of events could differ materially from those
anticipated in these forward-looking statements as a result of a number of
factors, including those set forth under the Risk Factors, Cautionary Notice
Regarding Forward-Looking Statements and Business sections in this Form 10-Q. We
use words such as "anticipate," "estimate," "plan," "project," "continuing,"
"ongoing," "expect," "believe," "intend," "may," "will," "should," "could," and
similar expressions to identify forward-looking statements.
The following discussions of our financial conditions and results of operations
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Act of 1934. Actual
results and the timing of certain events could differ materially from those
anticipated in these forward- looking statements as a result of certain factors,
including:
We have a history of operating losses, and expect that such losses will continue
in the future
Our stock price has been volatile and the investors could lose all of their
investment
Overview
Propalms, Inc. (the "Company"), formerly Jenna Lane, Inc. (Jenna Lane), was
incorporated in 1995 under the laws of the State of Delaware.
Propalms, Ltd was a UK registered company incorporated in October 2001 with a
fiscal year end of January 31. On July12, 2005 Propalms, Ltd purchased from
Tarantella, Inc. a license and purchase option agreement for the world wide
intellectual property rights, including the entire customer base and all the
ongoing maintenance revenue, of a software product called Terminal Services
Edition ("TSE"). Jenna Lane is a Nevada Corporation, incorporated in 1995. Jenna
Lane was a non-operating company. On December 8, 2006, shareholders of Propalms,
Ltd purchased 13,750,000 shares of Jenna Lane. On December 9, 2006, Jenna Lane
entered into an agreement with all the shareholders of Propalms, Ltd to exchange
230,000,000 shares of Jenna Lane for all the issued and outstanding stock of
Propalms, Ltd. After the consummation of the agreement, the former shareholders
of Propalms, Ltd. own 243,750,000 shares of common stock of Jenna Lane, which
represent 89.35% of Jenna Lane's outstanding shares. Jenna Lane moved from
Delaware to be incorporated in Nevada.
19
The exchange of shares with Propalms, Ltd. has been accounted for as a reverse
acquisition under the purchase method of accounting since the shareholders of
the Propalms, Ltd. obtained control of the consolidated entity. Accordingly, the
merger of the two companies has been recorded as a recapitalization of Propalms,
Ltd, with Propalms, Ltd being treated as the continuing entity. The historical
financial statements presented are those of Propalms, Ltd. The continuing
company has retained January 31 as its fiscal year end. The financial statements
of the legal acquirer are not significant; therefore, no pro forma financial
information is submitted.
The consolidated financial statements include the accounts of Propalms, Inc. and
its wholly owned subsidiary, Propalms, Ltd. All significant intercompany
accounts and transactions have been eliminated in consolidation.
During December 2006 Jenna Lane increased its authorized common shares to
500,000,000 in order to acquire Propalms Ltd.
In March 2007 Jenna Lane, Inc. changed its name to Propalms USA, Inc. and its
ticker symbol to PRPM.PK in order to better reflect the nature of the Company's
business. As a result of this recapitalization and reorganization, the financial
statements of the Company reflect the results of operations beginning on July
12, 2005 (since "Inception"). Further, on June 22, 2007 Propalms USA, Inc.
changed its name to Propalms, Inc. to better reflect the Company's international
sales and global presence.
Propalms, Inc., through Propalms, Ltd., develops TSE which offers users a system
management product for the Microsoft server based computing (SBC) environment.
TSE allows users to manage and operate all their software applications centrally
on their servers rather than on each individual desktop computer. The Company
markets and licenses its products through multiple channels such as value-added
resellers and channel distributors.
In October 2008 Propalms, Inc. received from FINRA clearance to begin quotations
on the OTC Bulletin Board, and its ticker symbol changed to PRPM.OB
Propalms, Inc on May 12, 2008 in an all cash transaction, completed its
acquisition of the source code and the customer lists of a Virtual Private
Network (VPN) solution from an Indian company called vFortress. The addition of
VPN capability to the Company's product offerings should result in additional
revenue generation.
20
Comparison of Three Month Periods Ended April 30, 2009 and 2008.
The following table sets forth the results of our operations for the periods
indicated:
2009 2008
------------ ------------
NET REVENUES $ 205,821 $ 235,086
COST OF SALES 80,696 180,218
GROSS PROFIT 125,125 54,827
OPERATING EXPENSES:
Research and development 66,248 60,258
Sales and marketing 117,718 115,105
General and administrative 252,489 569,109
Total Operating Expenses 436,455 744,472
LOSS FROM OPERATIONS (311,330) (689,645)
OTHER INCOME (EXPENSE):
Other income (expense) 6,005 (545)
Interest expense (14,479) (21,324)
Total Other Expenses (8,474) (21,869)
NET LOSS (319,805) (711,514)
OTHER COMPREHENSIVE ITEM:
Foreign currency translation (2,437) 14,373
COMPREHENSIVE LOSS $ (322,242) $ (697,141)
Net Revenues. For the three month period ended April 30, 2009, our net revenues
decreased approximately 12% from $235,046 to $205,821 relative to the same
period ended April 30, 2008 due to the decrease in the currency translation
rate.
Cost of Sales. Cost of sales decreased 55% from $180,218 for the three month
period ended April 30, 2008, to $80,696 for the three month period ended April
30, 2009. The decrease was due to decrease in the currency translation rate and
better cost control. The Company has controlled its cost incurred in India.
Also, with the modification to the software, the dependence on outside provider
has reduced significantly.
Gross Profit. Gross profit increased approximately 128% from $54,827 for the
three month period ended April 30, 2008 to $125,125 for the three month period
ended April 30, 2009. This increase in gross profit was primarily due to the
decrease in the cost of sales during the period.
Operating Expenses. For the three month period ended April 30, 2009, overall
operating expenses decreased approximately 41% from $744,472 to $436,455
relative to the three month period ended April 30, 2008. This decrease was
mainly due to the following:
Research and Development. Research and development expenses increased marginally
by approximately 10% from $60,258 for the three month period ended April 30,
2008 to $66,248 for the same period in 2009 due to increase in the developmental
activities.
21
Sales and Marketing Expenses. Sales and Marketing expenses increased marginally
by approximately 2% from $115,105 for the three month period ended April 30,
2008 to $117,718 for the same period in 2009.
General and Administrative Expenses. General and administrative expenses were
$569,109 for the three month period ended April 30, 2008, as compared to
$252,489 for the three month period ended April 30, 2009, a decrease of 56%.
This decrease is due to decrease in the investor relation fee and consulting fee
during this period.
Net Loss. Net loss decreased approximately 55% from a net loss of $711,514 for
the three month period ended April 30, 2008 to a net loss of $319,805 for the
three month period ended April 30, 2009.
Liquidity and Capital Resources
At April 30, 2009, we had cash on hand of $12,665 and a working capital deficit
of 1,815,799. At April 30, 2009, we had loans payable to various unrelated
parties amounting to $ 854,603.
The Company's future capital requirements will depend on many factors: the scope
and results of customer testing and installations, especially for the larger
customers, research and development activities, and the continued establishment
of the marketing and sales organizations. There is no guarantee that without
additional revenue or financing, the Company will be able to meet its future
working capital needs.
The consolidated financial statements do not include any adjustments relating to
the recoverability and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern. Our continuation as
a going concern is dependent upon our ability to generate sufficient cash flow
to meet our obligations on a timely basis, to retain our current financing, to
obtain additional financing, and ultimately to attain profitability. We are in
the process of raising equity financing to overcome the condition. If the
Company is unable to generate profits and is unable to continue to obtain
financing for its working capital requirements, it may have to curtail its
business sharply or cease business altogether.
Cash Flows
Three month period Ended April 30, 2009 and 2008
Net cash flow provided by operating activities was $56,254 for the three month
period ended April 30, 2009 and the net cash used in operations was $109,336 for
the three month period ended April 30, 2008. For the three month period ended
April 30, 2009, the increase in cash flows provided by operating activities was
mainly attributable to a decrease in the net loss.
The Company incurred cash outflows of $5,213 in investing activities during the
three month period ended April 30, 2008 as compared to none incurred in
investing activities for the same period in 2009 for the purchase of property &
equipment during the last year.
22
We raised a loan of $10,970 from unrelated parties and $10,632 from officers
during the three month period ended April 30, 2009. For the same period in 2008,
we raised $14,817 from unrelated parties and repaid $60,674 to related parties.
We also raised $185,626 through our investor relation firm by selling shares for
cash during the three month period ended April 30, 2008.
Contractual Obligations and Off-Balance Sheet Arrangements
Off Balance Sheet Arrangements
There are no off balance sheet arrangements between us and any other entity that
have, or are reasonably likely to have, a current or future effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
are material to the Company's stockholders.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
Pursuant to Item 305 of Regulation S-K, the Company is not required to provide
the information required by this Item, as it is a smaller reporting company, as
defined by Rule 229.10(f)(1) of Regulation S-K.
ITEM 4. Controls and Procedures.
We maintain disclosure controls and procedures (as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended)
that are designed to ensure that information required to be disclosed in our
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the SEC=C 3(euro)(TM)s rules and forms, and that such
information is accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure.
As required by Securities and Exchange Commission Rule 13a-15(b), we carried out
an evaluation, under the supervision and with the participation of management,
including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures as of April 30, 2009. Based on the foregoing, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective at the reasonable assurance level as of April 30,
2009.
In designing and evaluating the disclosure controls and procedures, our
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 that our management was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures.
Our management is responsible for establishin g and maintaining adequate
internal control over financial reporting. Internal control over financial
reporting is a process designed by, or under the supervision of, our principal
executive and principal financial officer and effected by our board of
directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to
risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial
reporting as of April 30, 2009. In making this assessment, our management used
the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control-Integrated Framework. Based upon
its assessment, management concluded that, as of April 30, 2009, our internal
control over financial reporting was effective.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of
1934, as amended) during the quarter ended April 30, 2009 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
23
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
The Company is not a party to any legal proceeding which would be material to
its business, financial condition or results of operations other than the
ordinary course, routine litigation.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the quarter ending April 30, 2009, the Company did not sell any shares.
No shares of the Company were purchased by or on behalf of the issuer or any
"affiliated purchaser," of shares or other units f any class of the issuer's
equity securities that is registered by the issuer pursuant to Section 12 of the
Securities Exchange Act.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Submission of Matters to a Vote of Security Holders.
During the fourth quarter of the fiscal year ended January 31, 2009, our annual
meeting of security holders was held on January 31, 2009. At this meeting the
following individuals were elected to serve as directors of the Company for a
one-year term: Robert Zysblat, Owen Dukes and Nakul Sood.
Also voted on at the Annual Meeting was the ratification of the appointment of
the Company's independent auditor Kabani & Company, Los Angeles, CA for 2009.
ITEM 5. Other Information.
None.
ITEM 6. Exhibits.
Exhibits Description
31.1 Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
31.2 Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
32.1 Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
32.2 Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Propalms, Inc.
June 22, 2009 /s/ Robert Zysblat
----------------------- -----------------------------------------
Date Robert Zysblat, President
June 22, 2009 /s/ Owen Dukes
----------------------- -----------------------------------------
Date Owen Dukes, CEO
25